The House of Representatives is set to start Tuesday floor debates on a bill that will rationalize and strengthen the problematic pension fund system for thousands of military and other uniformed personnel, including policemen, firemen, correctional officers, and coast guard personnel.
In his sponsorship speech for House Bill 8969, Albay Rep. Joey Salceda, chairman of the Ad Hoc Committee on the proposed Military and Uniformed Personnel Pension System Act, said the measure will address long-standing issues that undermine the “fiscal sustainability” of the current pension system.
“The annual appropriations allocated to the current MUP pension system have significantly increased over the years,” said Salceda, an economist and financial analyst by training. “From a pension fund appropriation of P64.2 billion in 2014, the budget has increased to P126.3 billion in 2023, a growth equivalent to 101 percent,” he added.
The pension fund appropriation, which is separate from the budget of the Department of National Defense, is equivalent to more than half the agency’s P204.6 billion expenditure program for 2023.
Salceda said the current pension system’s indexation to the salary of active personnel contrary to the common practice of other state pension funds of basing retiree’ pension on the average salary of the government employee during the last three years prior to retirement is another major weakness that needed to be rectified.
“Indexation become more unsustainable in 2018, when then President Duterte approved the increase in the base salaries of active personnel which doubled both the MUP salaries and retirees’ pension,” Salceda noted.
The pension fund experienced some reprieve when the salary increase was reduced to a more sustainable level of 8.47 percent and should ease further to 6.5% if President Ferdinand Marcos Jr. doesn’t approve any major salary hike until the end of his term in 2028.
Salceda said holding off salary hikes for military and uniformed personnel should also reduce the actuarial reserve deficiency of the current pension system that stands at P9.6 trillion, almost double the P5.7 trillion budget request of President Marcos for next year and around half the 2022 gross domestic product of P19.94 trillion based on constant 2018 prices.
Salceda said the salient features of HB 8969 that should make the pension fund sustainable include fixing at 3 percent the annual increase of military and uniformed personnel’s salaries over 10 years; raising the retirement age by a year to 57 years; a gradual shift to contributory scheme to augment the funding source of the pension fund; creating separate pension funds for the military and for uniformed personnel; and the creation of a management committee, with the Bureau of Treasury as secretariat and the GSIS as fund manager.
The Secretary of Finance, according to the provision of HB8969, will head the trust fund committee. Other members include the secretaries of defense, interior and local government, budget and management, justice, transportation, the executive secretary, the president of the GSIS, the Armed Forced Chief of Staff, and the chief of the Philippine National Police.
The pension funds initial capitalization will be determined by the trust fund committee while additional funding will come from mandatory contribution from members, and from unprogrammed appropriations and the lease or sale government assets.The trust fund committee will submit to Congress every three years the financial statements and reports of the pension funds.
