MUP PENSION. Malacañang Press Briefer Daphne Oseña-Paez and Department of Finance (DOF) Secretary Benjamin Diokno hold a press briefing at Malacanan Palace on Tuesday (March 28, 2023). Diokno said President Ferdinand Marcos Jr. approved the proposed reforms in the military and uniformed personnel (MUP) retirement and pension system that are crucial to the country’s post-Covid-19 pandemic fiscal and economic recovery. (Screengrab from RTVM)

MANILA – The administration of President Ferdinand R. Marcos Jr. is eyeing to implement reforms in the military and uniformed personnel (MUP) retirement and pension system to avoid a "fiscal collapse" caused by the Covid-19 pandemic.

In a Palace press briefing, Department of Finance (DOF) Secretary Benjamin Diokno said Marcos expressed support for four proposals namely:

-- The reform to apply to all active personnel and new entrants.
-- Removal of automatic indexation of pension to the salary of active personnel of single ranks.
-- Military and uniformed personnel will receive their pension starting at 57 years old, not automatically after 20 years of service.
-- Mandatory contributions will be required for active personnel and new entrance similar to the Government Service Insurance System (GSIS) pensioners.

Diokno cited issues in the current pension system such as how it is non-contributory which means retirement pensions and benefits are fully funded by the national government through annual appropriations despite having no contribution from the retirees.

Under the proposed new pension scheme, he said “all those who are in active service and the new recruits will have to pay.”

He said should these reforms take place, automatic indexation of pension to the salary of active personnel of similar ranks must be removed.

“The MUP pension is automatically indexed to the salary of the personnel of the same rank. In other words, if you are a retiree [and] if you are a general getting X amount of money, if the salary of the incumbent is doubled, you get your pension doubled also,” he said.

Diokno said he also found it “ridiculous” that when military and uniformed personnel who choose to retire as early as 40-years-old get pension up to age 90-years-old.

“We have to really address that issue. It’s not sustainable. I said, if this goes on, there will be a fiscal collapse,” he said, describing reforms in the MUP system as "the elephant in the room."

To date, Diokno said both Department of National Defense (DND) Secretary Carlito Galvez Jr. and Department of the Interior and Local Government (DILG) Secretary Benhur Abalos Jr. have agreed with all four proposals.

Asked how much military and uniformed personnel will be contributing to the new MUP pension system, the DOF chief said it will be a “gradual” contribution.

“For the first three years, ang contribution nila (their contribution) is 5 percent of the salary and then ang (the) contribution ng (of the) national government (NG) will be 16 percent,” he said.

“And then for the next three years, it will be increased to 7 percent and then yung (the) NG share will decline to 14 percent kasi…Years thereafter, the MUP share will be increased to 9 percent and NG 12 percent,” he added.

Diokno likewise expressed confidence that the military and uniformed personnel would not have issues with the new MUP system.

“Nung 2018, dinoble yung suweldo nila. Kaya nga gradual yung contribution from 5 to 7 to 9. I think naintindihan din nila that they have to cooperate with the rest of society otherwise magba-balloon talaga yung deficit natin (In 2018, their salaries were doubled. That’s why their contribution was increased gradually from 5 to 7 to 9 percent. I think they understand that they have to cooperate with the rest of society otherwise of deficit will balloon),” he said.

Strong support

Meanwhile, Diokno was also hopeful that Marcos administration would succeed in pushing for the proposed reforms in the MUP retirement and pension system in Congress.

“I think President Marcos Jr. is in the best position to push through with this reform…Remember that he is the first President who was elected by a significant majority, 60 percent. So, he really has very strong support and he’s willing to spend his political capital for this because nakikita na pag hindi ginawa (he can see that if we do not do this) there will be fiscal collapse in the future,” he said.

“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,” he added.

The pension fund covers the Armed Forces of the Philippines, Bureau of Jail Management and Penology, Bureau of Fire Protection, Philippine National Police, Philippine Public Safety College, Philippine Coast Guard and the Bureau of Corrections. (PNA)