By Kyle Aristophere T. Atienza and Keisha B. Ta-asan, Reporters

NEW Defense Secretary Gilbert C. Teodoro on Thursday assured that reforms in the pension system for military and uniformed personnel (MUP) will be implemented gradually, with consideration for the interests of both beneficiaries and the government coffers.   

Mr. Teodoro made the statement after being asked to comment on warnings that there could be a mass exodus of enlisted personnel from the military, police, and other uniformed forces should the government push through with its plan to implement mandatory contributions for the pension fund.

Speaking to Palace reporters, Mr. Teodoro said that having come from the financial sector prior to his new post, he understands the need to adopt changes in the MUP pension system cautiously.

“Because I also came from the financial sector, this would not happen abruptly,” he said in Filipino.

“We will just lessen the bleeding, as the government calls it, until the system becomes self-sustaining,” he added.

Mr. Teodoro earlier said President Ferdinand R. Marcos, Jr.’s first marching order for him is to resolve issues concerning the MUP pension.

He guaranteed that financial risk management standards will be applied to protect the MUP contributions.

“The financial sector knows that, that there should be governance standards,  prudential standards, proper risk management, proper audit, transparency,” he said, adding that management of the pension fund should be subject to the central bank’s monitoring.

The Government Service Insurance System (GSIS), which handles the pension fund for civil servants, said on Thursday that the MUP fund will be kept separate.    

Speaking to around 300 Philippine National Police (PNP) officers and at least 1,000 online participants during the government’s second round of consultations, GSIS Senior Vice President George S. Ongkeko said the GSIS will only manage the MUP funds.

“The GSIS will ensure there will be no co-mingling of funds, so do not worry. The GSIS manages various funds, and in all of those funds, we make sure there is no co-mingling,” Mr. Ongkeko said in Filipino, based on a statement from the Department of Finance.

The government is looking to start requiring all active MUP and new recruits to contribute to their pensions starting next year.

National Treasurer Rosalia V. De Leon told reporters in a Viber message that the GSIS will be a trust fund manager, but a committee composed of the Department of Finance, Department of Budget and Management, Office of the President, and the GSIS will oversee the fund.

“There will be separate account for the MUP as well as sub funds for different MUP services,” Ms. De Leon said, adding that they will monitor the respective contributions and disbursements for members.

“MUPs will not be GSIS members,” she added.

DoF Undersecretary Maria Luwalhati C. Dorotan Tiuseco said the government is looking forward to have more discussions to address other concerns and details.

“Rest assured that we would be more than willing to talk in smaller groups if needed so we can better explain the proposals,” she said.

Meanwhile, PNP Lieutenant General Michael John Dubria said the police would remain “open to further discussions.”

“It is a fact that the President himself intended for this project,” he said. “(Everyone) hopes for the best, for the good of the economy, the nation, and the welfare of all.”

In a note, GlobalSource analysts Romeo L. Bernardo and Maria Christine Tang said the changes in the MUP pension reform may help improve tax administration.

“DoF officials are now doing the rounds of consultation with MUPs and the likely outcome would be a set of more modest changes that will reduce the annual drain on the budget and slow the growth of pension liabilities,” they said.   

Finance Secretary Benjamin E. Diokno in late March warned of a possible “fiscal collapse” should the government fail to reform the MUP pension system, noting that the government has set aside P120-130 billion for the pension program for this year alone.

He said the amount that the government allocates for the pension of retirees from the security sector is much bigger than the funds being earmarked for the maintenance and operating expenditures of the whole Armed Forces of the Philippines (AFP).

Under the current setup, the pension of retired personnel increases by 100% when the salary of the incumbent personnel is doubled. The average monthly pension of a military personnel is around P40,000.

Military or uniformed personnel who choose to retire after 20 years of service can already receive a pension since there is no minimum “pensionable” age, Mr. Diokno said. Some personnel even get recruited at the age of 20 so they can retire by 40.

Earlier this month, Mr. Marcos Jr.  said the MUP pension fund would be depleted in the next five to six years if the present setup continues.

The Defense department, on the other hand, had previously warned that should the government push through with its plan to reform the MUP pension, an estimated 70% to 80% of the military’s enlisted soldiers may retire early.

The MUP pension program covers members of the AFP, PNP, Bureau of Jail Management and Penology, Bureau of Fire Protection, Philippine Public Safety College, Coast Guard, and Bureau of Corrections.

The proposed MUP pension reform is among the legislative priorities of the Marcos administration. It is still pending at the committee level in both chambers of Congress.

“I hope that as soon as possible, Congress will act on it and the President will sign it,” Mr. Teodoro said, noting that his agency is at the same working with various sectors for the proposal.