(Contributed photo)

MANILA – Top officials of the Department of Finance (DOF), Department of National Defense (DND), and Department of the Interior and Local Government (DILG) will meet Monday to discuss the details of the proposed Military Uniformed Personnel (MUP) pension reform.

Finance Secretary Benjamin Diokno, DND Secretary Carlito Galvez Jr., DILG Secretary Benhur Abalos, and representatives from the Office of President and the Department of Budget and Management will flesh out details of the proposed pension program.

"We are determined to come up with a reasonable proposal in consultation with the concerned agencies and stakeholders," Diokno said in a recent briefing.

"Open dialogue will be key to coming up with a reasonable solution to this monumental problem and providing a level of predictability for current and future MUP pensioners."

Under the current pension system, MUP are automatically granted one rank higher upon retirement with their monthly pension automatically indexed to the salary of personnel in active service.

According to the Finance department, MUP do not contribute to the pension system and the pension benefits are appropriated annually through the General Appropriations Act.

Citing a 2019 actuarial study by the Government Service Insurance System (GSIS), Diokno said the government must spend PHP848.39 billion pesos annually for the next 20 years to finance the current pension system.

Data released by the DOF also showed that the current level of pension spending exceeds the spending to equip personnel who are in active service.

In 2021, the spending for MUP pension reached PHP160 billion, higher by 38 percent than the spending on maintenance and other operating expenses (MOOE) and capital outlays (CO) at PHP116 billion.

Last year, the MUP pension spending amounted to PHP164 billion, also above the MOOE and CO spending level of PHP125 billion.

He noted that the current system is "simply not fiscally sustainable."

"The Bureau of the Treasury estimates that the level of total unfunded pension liabilities is PHP9.6 trillion. This is around half of GDP (gross domestic product) in 2022. Further, considering that the current pension system is fully funded by the national government, the accumulating pension liabilities will likely increase public debt by as much as 25 percent by 2030," he warned.

"If we do not address the huge and rising unfunded liabilities of the current MUP pension system now, securing sufficient resources to provide for the benefits of future pensioners and their dependents will be extremely challenging," Diokno added.

Diokno said a unified separation, retirement and pension system for the MUP is proposed in place of piecemeal reforms.

This will apply to those in the active service and new entrants, and members across all MUP agencies.

Diokno said that under one of the proposals in the total solution package, MUP contribution to the pension system will be 3 percent of their salary for the first three years.

This will be increased to 6 percent after three years and then 9 percent the years thereafter.

Diokno, however, noted that there's a government counterpart "so there's an employee-employer contribution."

The current proposal also significantly increases the disability pensions on top of MUP's other benefits.

"Future beneficiaries from the pension system should start paying premiums just like other government workers [as in the case of GSI] and private sector workers [Social Security System]. That’s how pension systems work and financed anywhere in the world," said Diokno. (PNA)