DOF: No pension cuts for existing MUP retirees

The Department of Finance (DOF) has assured that retired members of the uniformed services will not be affected by the government's proposed pension reforms currently pending in Congress.

Finance Undersecretary Cielo D. Magno said one of the key features of the DOF proposal is to maintain the current levels of military and uniformed personnel (MUP) pensions, ensuring that their benefits do not diminish.

Magno explained that the intention of the pension reform bill is to establish a sustainable pension system for those in active service and new recruits, eliminating the need for future budget appropriations from the government.

The current MUP pension system operates on a non-contributory basis, which implies that retirement pensions and benefits are fully financed through annual budget allocations.

“We need a sustainable pension. We want to make sure that when they [MUP personnel] retire, we can fund the pension,” said Magno at the Pandesal Forum on Thursday, Aug. 31.

The forum was also attended by Retired Colonel Ariel Querubin, who voiced concerns about the potential impact of the proposed measure on the existing 250,000 MUP pensioners.

But Magno assured Querubin and other retirees that their pension amount would stay the same and be adjusted based on the MUP's current wages if the bill becomes law.

However, the DOF official said some aspects of the MUP pension reform bill still need more discussions, specifically regarding the mandatory contribution of active personnel and the removal of pension indexation for active personnel and new entrants.

Earlier, Finance Secretary Benjamin E. Diokno said there would be no negotiation regarding the proposed elimination of automatic pension indexation for future retired MUP personnel. 

Diokno explained that the automatic increase in pensions for existing pensioners, which is tied to current wages, is a primary cause of the government's budgetary constraints. 

The DOF has proposed that adjustments in MUP pensions should be based on economic conditions and the financial feasibility of the pension fund, instead of automatic indexation.

Since 2018, MUP pension obligations have consistently exceeded the allocated budget for maintenance and other military expenses.

Diokno said this situation has hindered the government's ability to meet the needs of military modernization effectively.

Diokno further explained that maintaining indexation would be financially unsustainable, especially when coupled with guaranteed increases, as it would exacerbate the budget deficit.

Government estimates showed that providing a guaranteed three percent annual salary increase for 10 years, along with full pension benefit indexation, would require increasing amounts of funding, starting at P11.8 billion in 2024 and rising to P165 billion in 2033. (Gabriell Christel Galang)