The Marcos Jr. administration’s economic team has once again flagged the fiscal risks arising from the ballooning pension of military and uniformed personnel (MUP), which, if left unaddressed, would impact not only the national coffers but also the pensioners themselves.

“The need to reform the MUP pension system has consistently been identified as a significant risk observed by the national government (NG) throughout the various iterations of this report. Since MUP pensions are fully funded by the general appropriations act (GAA), any fiscal and/or economic shock affecting the NG would directly impact not only the NG fiscal position but also MUP pensioners,” the Cabinet-level, interagency Development Budget Coordination Committee (DBCC) said in its Fiscal Risks Statement 2026 published on Thursday, Dec. 11.

Since the Benigno Aquino III administration, the DBCC has been flagging the continued rise in MUP pension payments as a fiscal risk, straining the government’s limited budget resources.

As of 2023, government estimates showed that MUP’s unfunded liabilities soared to at least ₱9.6 trillion from only ₱5 trillion in 2016. Unfunded liabilities refer to the amount anticipated as future payouts for active personnel as well as current pensioners.

This was due to the automatic indexation of pensions—retirees enjoyed the same increase in benefits each year alongside rising salaries of active personnel.

Earlier estimates by the state-run pension fund Government Service Insurance System (GSIS) showed that the current pension scheme will cost the government ₱850 billion yearly during the next two decades.

Bills pending across several Congresses aimed at curbing the yawning unfunded liabilities have proposed removing automatic indexation and requiring new MUP to contribute to their pensions.

At present, the NG shoulders the pension benefits for retired military, police, and other uniformed officers through the annual national budget or GAA.

Other reform measures pushed in previous Congresses also sought to raise the mandatory retirement age to 60 from 56, plus an option for early retirement after a minimum of 20 years in service, with only those 56 and above eligible for pension.

Also proposed in the past was the establishment of a separate pension system for incoming personnel, with the GSIS serving as fund manager. To finance this new pension scheme, the government would have to raise capital through the sale and lease of military land assets.

According to the DBCC, “it is acknowledged that the current MUP pension system could become increasingly unsustainable if certain features are not remedied,” pointing specifically to the lack of mandatory MUP contributions, “unlike civilians who mandatorily contribute a portion of their salary—which in turn ease the burden of financing from the government.”

Together with the automatic indexation scheme, which is also “exacerbated by the absence of a cap on salary adjustments for active MUP,” the DBCC warned of “further pressure on the fiscal resources over time,” such that “the risks to the fiscal position become more apparent.”

Just last week, President Ferdinand R. Marcos Jr. announced that all MUP will receive a base pay increase starting 2026, which will be rolled out in three tranches through 2028.

“In advocating for MUP pension reform, the NG does not discount the indispensable role of MUP in public order and national security. Nevertheless, prudent fiscal management requires analyzing the impact of current and forthcoming policies, considering the NG’s current fiscal realities and commitments,” the DBCC said.

As such, the DBCC said that MUP pension reforms “should endeavor to limit the provision for guaranteed base pay adjustment; adopt a mandatory contribution scheme for new entrants; exclude riders that are unrelated to the goal of the pension system (such as medical insurance); and explore funding sources that are more sustainable in the long-term to ease financing constraints.”

“These should be prioritized over the current proposals, which include, but are not limited to, leftover assets and funds from the Armed Forces of the Philippines (AFP) Retirement and Separation Benefits System (RSBS), military reservations, income from public-private partnerships (PPPs) entered into by the Department of National Defense (DND) or AFP, and non-strategic real estate assets of the DND or AFP,” the DBCC added.

The DBCC also flagged emerging issues affecting MUP that could further strain the country’s fiscal position, including the recent increase in subsistence allowance for AFP officers and enlisted personnel and the base pay hike for civilian government workers, which may also trigger demands from MUP for comparable adjustments.

Back in August, then-Department of Finance (DOF) chief and now Executive Secretary Ralph G. Recto said that MUP reform has not made the cut for the priority legislation of the current administration’s three remaining years, as enacting changes would entail higher costs.