The Senate national defense committee discussed today several proposed measures that seek to establish reforms toward creating a fair, sustainable and clear mechanism for the payment of pensions of military and unformed personnel (MUP) which is reaching the P6 trillion level for this year.

Senator Panfilo M. Lacson, committee chairman, and Senate Minority Leader Franklin M. Drilon, said the huge pension fund requirement, if not managed immediately, would have dire consequences in the financial welfare of our country.

‘’I speak of the ballooning pension requirements of our MUP which we fear may no longer be sustained by our scarce government resources in the coming years,’’ Lacson said at the start of his in-person and virtual committee public hearing.

‘’Certainly, it is high time we create a stand-alone special fund so that we may deter the inevitable fiscal disaster of draining the public coffers attributed to the bloating pension requirements of our uniformed retirees which up to this very moment completely rely on (funding from) the national budget,’’ he said.

‘’The numbers don’t lie and they boggle the mind. The actual total releases for the MUP pensions under the 2019 GAA (General Appropriations Act) for MUP pensions amounted to P107.2 billion while for this year, the adjusted appropriated amount is P80 billion.  As proposed under the 2021 NEP  (National Expenditure Program), Congress is expected to approve P135.8 billion  to fund the pensions of the MUP,’’ he added.

‘’How do we hit the right balance as we carry out our constitutional mandate to provide adequate remuneration and benefits to our MUP while also ensuring that we have sufficient funds to manage our resource and financial obligations?’’ he asked.

Key features of the proposed measures are to utilize proceeds derived from interests and sound investment earnings from a corpus fund collected from the sale of government assets and properties, or lease or joint development with the private sector.

Lacson said two vital questions need to be addressed, as follows:

‘’First, what viable assets of the MUP services and the government in general can be used to establish the seed fund for this purpose; and

“Second, how much can be generated to establish the pension fund which as estimated by our economic managers, would run up to almost P6 trillion?”

Another issue, Lacson pointed out, as an augmentation of the first proposal is:  what would be the feasible weight of mandatory contributions from the active members of the MUP in order to sustain our funding need? How much would be the corresponding yearly share of the government in said mandatory contributions if any?

‘’Concomitantly, since the compulsory retirement age will be an important factor in the continuity and viability of the fund, should it be maintained at the current 56 years of age, or should it be raised to 60 or even 65? If so, what are the fiscal implications? What is the potential impact on the future pension requirement should the scrapping of indexation become a reality?’’ he asked.

What pension system should the government adopt in order to achieve financial standing that is sound and sustainable? And ultimately, what would be the total financial burden to the government should this new system be adopted?’’ he added.

There is another bill prescribing fixed terms for the Chief of Staff and other key officers of the AFP, increase in the mandatory age of retirement of military personnel, and provision of a more effective attrition system, Lacson pointed out.

‘’Having said all that, doing the math and some simulations and correctly is the key to arriving at the most viable and acceptable solution to this very complicated problem that we as legislators and policy makers are facing,’’ he said.

Present during the hearing were officials of the Bureau of Treasury and Government Service insurance Service (GSIS) and the Department of National Defense (DND) and uniformed services such as the Philippine National Police (PNP) and Bureau of Fire Protection (BFP), among others.

Heads of the MUP organizations promised to submit to the Lacson committee the data as requested by the GSIS and Bureau of Treasury such as a list of their personnel and their current pensions, among other requirements.