Soldiers are seen at the Philippine Army’s 126th Founding Anniversary in Fort Bonifacio, Taguig City, March 22, 2023. — PHILIPPINE STAR/KRIZ JOHN ROSALES

By Kyle Aristophere T. Atienza, Reporter

THE FINANCE DEPARTMENT on Tuesday warned of a possible “fiscal collapse” should the government fail to reform the pension system for retired military and uniformed personnel (MUP).

At a Palace news briefing, Finance Secretary Benjamin E. Diokno said President Ferdinand R. Marcos, Jr. will push for the passage of the bill seeking to reform the MUP pension program, saying the current setup is unsustainable and could lead to “fiscal collapse.” 

The government has set aside P120-130 billion for the pension program for this year alone, Mr. Diokno said.

“Right now, the situation is so bleak. For example, if you compare the current operating expenditures, the maintenance and operating expenditures of the whole AFP (Armed Forces of the Philippines) with the capital outlays… it is actually much less than the amount of pension that we are allocating for the retirees,” he said. 

Mr. Diokno warned that the pension for retired military and uniformed personnel could account for as much as one-third or one-fourth of the AFP’s budget in the future. 

“It’s not sustainable. I said if this goes on, there will be a fiscal collapse,” he added. 

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

Mr. Diokno said that under the current setup, the pension of retired personnel increases by 100% when the salary of the incumbent personnel is doubled.

He noted that a military or uniformed personnel who chooses to retire after 20 years of service can already receive a pension, since there is no minimum “pensionable” age. Some personnel even get recruited at the age of 20 so they can retire by 40, he added.

“Military people, they live longer than us…some at the age of 90. So, they retire at 40 to get their pension up to age 90. Isn’t that ridiculous,” Mr. Diokno said.

The average monthly pension of a military personnel is around P40,000, according to the Finance chief.

“Compare that to what SSS (Social Security System) retirees get, it’s P4,528 and what a GSIS (Government Service Insurance System) personnel get, P13,600,” he said. “So the pension that is received by a military pensioner is nine times higher than the average pension of a pensioner under SSS and three times higher than the average pension under GSIS.”

As part of the MUP pension reform, Mr. Diokno said they want to require all active military personnel and new entrants to contribute to their pension, instead of the government fully funding it.

“All those who are in active service and new recruits will have to pay their way, no longer free. There’s unanimity. We talked to [Defense] Sec. [Carlito G.] Galvez, [Jr.], we talked to [Interior] Sec. Benhur Abalos and they generally agreed with all the four [options],” he said.

The Finance chief also proposed to stop automatically indexing the retirees’ pension to the salary of active personnel of similar ranks, and to raise the age that military and uniformed personnel get their pension to 57 from the current 56.

The proposed reform will be applied to all active personnel and new entrants, he added.

Mr. Diokno expressed confidence that the bill would be passed by Congress this year, saying the President is “willing to risk his political capital for this.”

“Mr. Marcos also has very strong control of both Houses of Congress — so it’s going to be less problematic for him to push forward such a major reform.”

The Finance chief does not believe the proposed reforms would demoralize military and uniformed personnel, saying the government had already doubled their salary in 2018.

“I think they also understand that they have to cooperate with the rest of society. Otherwise, our deficit will blow up.”

The MUP pension program covered 137,649 retired personnel in the first quarter of 2023, the Budget department said in January.

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

“We need to pass the MUP pension bill as the current set up might lead to disintegration of the pension as a whole,” House Public Order and Safety Committee Chairman and Santa Rosa City Rep. Dan S. Fernandez said in a Viber message.

Mr. Fernandez said they are just waiting for the House defense panel, the lead committee, to call for a hearing on the bill.

“The pension for AFP-DND (Department of National Defense) for 2021 was 112% of base pay while in the PNP, the pension was 50% or one half of base pay of active policemen. The average pension of all MUP was 70% of [their] base pay,” he said.

The lawmaker noted that the pension of a retired AFP member is larger than the base pay of an active soldier.

“A retired general can get as much as P190,000 monthly pension for life which will redound to a P800-billion budget for the next 20 years,” he said.

A similar bill was certified as urgent by former president Rodrigo R. Duterte in 2019, but it failed to pass the 18th Congress.

“The challenge might be on retiring personnel who do not have enough safety nets or have not transitioned towards managing investments,” Hansley A. Juliano, a political economy researcher, said via Facebook Messenger chat.

“This doesn’t even include retiring officers who are receiving larger sendoffs. If there’s a sizable [number] of them complaining or who are serving as the constituencies of certain politicians or political parties, you can expect them to be the basis of opposition to the bill,” he said.

Mr. Juliano said the bill might also trigger opposition from families of military and uniformed personnel.

“It is very likely that families who will be vulnerable will lobby against the bill. House members who tend to maintain ‘clientelistic’ ties to these communities will likely be forced to choose to either please the constituency or obey the President.”