Lump-sum pension options considered for MUP retirees

By Luisa Maria Jacinta C. Jocson, Reporter

THE Department of Finance (DoF) said it is studying options like lump-sum payments to reduce its potential liability to military and uniformed personnel (MUP) pensioners.

“Under the enhanced proposal, MUPs who avail of optional retirement are given the prerogative to choose among three options in claiming pension benefits,” the DoF said in a statement.

These options include receiving the net present value of pension benefits in a lump sum upon retirement.

Other options include the payment of the benefits after five years. It is also considering an option of MUPs receiving their benefits upon reaching age 57.

In March, Mr. Diokno announced the government’s intention to reform the current MUP pension program as it is not “fiscally sustainable.”

The DoF has estimated that the accumulating pension liability will likely increase public debt by as much as 25% by 2030.

The government will also need to spend an estimated P848.39 billion to finance the current pension system over the next 20 years.

Under the current pension system, MUPs are automatically promoted one rank upon retirement and can receive their pension after 20 years’ service, with no minimum pensionable age.

The pension is also automatically indexed to the salary of active personnel.

“The new options were proposed in consideration of varying financial situations among MUPs and will be applied on a case-to-case basis,” the department said.

Finance Undersecretary Maria Cielo D. Magno said that the economic team is studying the pension systems of other government agencies.

“The economic team will continue to gather sentiments of the MUPs and introduce necessary improvements to the proposal in order to craft a well-balanced solution,” the DoF added.

Following consultations with various military units, the team is set to meet with the Philippine National Police on June 7 to further refine the proposal.

Bienvenido S. Oplas, Jr., president of a research consultancy and of the Minimal Government Thinkers think tank, proposed taxing the pensions.

“All these three proposals are good. But I think a fourth one is needed: all MUP pensions should be taxed,” he said in a Viber message.

Under the current system, MUPs do not contribute towards their own pension fund. Instead, the pension benefits are drawn annually from the national budget.

“Current MUP pensioners contribute zero for their pension. Their pensions are currently untaxed,” Mr. Oplas said.

Hansley A. Juliano said through Facebook Messenger chat that it is a step in the right direction to consider separate options depending on the MUPs’ needs.

“That said, this means it will also entail the necessity for guidance or assistance for pension recipients to ensure they manage their benefits properly,” Mr. Juliano, a political economy researcher studying at Japan’s Nagoya University’s Graduate School of International Development, said.

“I do wonder if the government has reviewed pension options from private providers in comparison, as maintaining those standards will be needed in ensuring the options chosen by the retirees will actually benefit them in the long run and it is also sustainable to the fund as was the point of this restructuring,” he added.

Mr. Juliano noted that there is still a need to “reconcile defense spending and social spending.”

“I get the impression our military retirees do prefer theirs because the general state of social security in the Philippines is not equitable. The long-term objective of course is to make it equitable,” he added.