An official on Wednesday expressed support for a major reform in the pension systems for uniformed personnel as the systems’ liabilities to active service members alone have already reached P9.6 trillion in projected payouts.
Albay Rep. Joey Sarte Salceda, chairman of the House Committee on Ways and Means, filed the Military and Uniformed Personnel Pension Reform Bill under House Bill 8593.
Salceda says reform in the pension systems is critical as pension liabilities for current active personnel already runs to P9.6 trillion, according to a study conducted by the Government Service Insurance System.
“P9.6 trillion is half of our GDP. Any pension liability that covers half of your economy is trouble. And the problem will only get bigger if we don’t solve it now,” Salceda said.
“The problem with the pension system for MUP is that there is no sharing between employees and the government, so all liabilities are current. There is no seed fund to grow. Right now, pension spending for our uniformed services already exceeds the maintenance, operating, and other expenses for their departments. That’s not sustainable.
“I would rather do this difficult reform now than face retired service members and tell them, ‘sorry, we can’t pay for your pension anymore’.”
Salceda said unlike all other pension systems, where contributions from both employer and employee are managed in a pension fund, and where the liabilities are deferred, the MUP pension system is essentially no different from for-life government salary.
“There is no pension fund to speak of. It’s always a budget item. It will eventually eat up the budget, unless we can find ways to defer the liabilities and keep some funds in trust,” Salceda said.
Unlike other government employees, MUP is entitled to a retirement pension starting at 20 years of service even if they have not reached retirement age.
“We recognize the bravery of service members in defending the Constitution and the people. In doing so, what we must not do, however, is to compromise the same nation they are defending by risking its fiscal situation.
“The size of the problem will continue to expand as we recruit more MUP. MUP pension is nine times that of the average pensioner of the Social Security System and three times that of the average GSIS pensioner.”
Under Salceda’s bill, the government will impose mandatory contributions as follows: First three years: 5 percent employee, 16 percent National Government; Next three years: 7 percent employee, 14 percent NG and years thereafter: 9 percent employee, 12 percent NG, which is the same rate with other GSIS pensioners.
The bill will also introduce pension indexation, or the discontinuation of automatic indexation, which will be reviewed periodically and can be adjusted to a maximum of 1.5 percent.
The bill also introduces adjustments in pensionable age. MUP pensionable age will be set at 56 years, regardless of years of service.
The bill also sets the framework for the fund administration of MUP pension. A new entity will be established to be the administrator of the MUP fund while GSIS will act as its fund manager.
The bill also identifies other sources of funding for MUP pension, including proceeds from the sale/lease of assets of the MUP and from NG assets from the Manila Bay reclamation and other identified assets.
Salceda says he is open to changes to the bill, particularly on when the new scheme will take effect and which personnel it will cover.