Gov’t expects military pension system to be self-sustaining in 20 years

By Aaron Michael C. Sy and Beatriz Marie D. Cruz, Reporters

THE GOVERNMENT is expecting the military and uniformed personnel (MUP) pension system to be self-sustaining after 20 years if the proposed bill hiking contributions would be implemented, especially with new entrants in the uniformed services.

According to a proposed bill by the House of Representatives ad hoc committee, all MUPs would now be required to contribute a bigger percentage of their salaries to the pension fund, with new entrants contributing the largest percentage of their salary at 9%.

Under the proposed measure, incremental increases for active personnel would have them contribute 5% of their salary to the fund for the first three years, 7% for the next three years, and 9% thereafter.

The effort will be matched by a larger government contribution to the fund at about 11% of the MUP standard salary. Finance Undersecretary Maria Cielo Magno said this would be equivalent to about P40-P50 billion in the first year of implementation.

Finance Undersecretary Maria Luwalhati C. Dorotan-Tiuseco said the new schedule of contributions from the new entrants will shorten the spending of the government on the pension versus the 60 years it would take for it to be self-sustaining.

Finance Secretary Benjamin E. Diokno said this will help free up the government to spend on other purposes such as health or education.

Meanwhile, Mr. Diokno also said that the Government Service Insurance System (GSIS) will be given assets to liquidate for the management of the MUP pension system.

While there is no decided amount yet on the capital that GSIS will need, Mr. Diokno cited P9 trillion in unfunded liability that could factor into the budget.

Meanwhile, defense and security analyst Chester B. Cabalza said the proposed reform could be revised further to differentiate percentages according to the nature of an MUP’s work.

Mr. Cabalza, founding president of Manila-based International Development and Security Cooperation, said over the weekend that the new pension system will certainly impact the promotion and recruitment system of the MUP because of the increasing percentage of contributions.

However, it would be a scourge to new entrants, since their contributions under the proposal is quite heavy. “If that’s the case, young MUPs will not stay longer in the service and will use the opportunity as a stepping stone to high paying jobs in private firms and abroad,” he said.

Mr. Cabalza said contribution percentages could be set per organization of MUPs, as “all of them differ in the number of recruits, promotions, and retirees,” he said.

“Since there will be differing pension system based on the rate of percentages due to their own respective force structure, the benefits will matter as it becomes more competitive and fruitful to their career or professional development,” he said.

Hansley A. Juliano, a political economy researcher studying at the Nagoya University’s Graduate School of International Development in Japan, urged for more consultations with veteran MUPs themselves.

“Making the reform sustainable, equitable and fair to the affected personnel does require a clear setting of what is the general quality of life of that retired personnel really have,” Mr. Juliano said in a Facebook Messenger chat.