MANILA – A House of Representatives panel on Wednesday approved the proposal retaining the current scheme for the military and uniformed personnel (MUP) pension system with an added condition that puts a cap on salary increases.
The House Ad Hoc Committee on the MUP Pension System approved the new unnumbered substitute bill proposing the retention of the MUP pension scheme with the condition that pay raises of MUP personnel will be capped at an annual increase of 5 percent for 10 years.
This development comes after the military and uniformed services requested the panel to consider the unique risks in their profession in drafting the proposal.
Albay Rep. Joey Salceda, committee chair, said that the 5-percent cap would still be a favorable situation for MUPs, considering that the average nominal wage increase is 4.2 percent over the last 5 years and 4.4 percent over the last 10 years.
“We have studied and listened to the concerns of the uniformed services. Our resolution is to simplify the reform. The heart of the problem is indexation to very rapidly growing salaries. So, the solution is to contain the most crucial aspect of the problem. Let’s contain uncontrollable salary increase,” Salceda said.
Salceda explained that the retention of the pension system structure includes voluntary retirement.
“And because President Duterte raised their salaries almost by double, they are starting from a high base. So, 5 percent for them is really much higher in monetary terms than 5 percent for a lower-paid employee,” Salceda said.
Salceda explained that the measure “saves the system from collapse” and ensures that the pensions can be funded for the next 10 years.
“Basically, it buys time for us to find better funding sources and benefits structures for the MUP pension,” Salceda said.
He said capping salary increases at a decent rate addresses two-thirds of a problem.
He highlighted that the remaining part of the problem that needs to be solved is making the tax system more efficient.
“Complex problems sometimes require simple solutions. This is one of such problems. By capping salary increases at a decent rate, we give the national government some predictability over the pensions and salaries it will owe,” Salceda said. “But at least, we no longer have a titanic fiscal challenge looming over us.”
On Tuesday, Defense Secretary Delfin Lorenzana said the current MUP pension system has to undergo reforms as allowing it to continue will become burdensome for taxpayers.
He added that revisiting the pension system should have the objective of generating and maintaining a self-sustaining fund that would totally or partially unburden the government financially.
Lorenzana added that the welfare of MUP retirees is their utmost priority in talking with lawmakers regarding the matter.
In his 2017 budget message, President Rodrigo Duterte said the pension reform should be pursued "in view of the ballooning budget burden where the total cost of the pensions of retired soldiers will exceed the compensation of those in active service."
Around PHP800 billion is needed annually for the next 20 years to pay the pension of the MUP, according to the Government Service Insurance System, based on the existing scheme. (PNA)
