‘Reforms in AFP pension system will not affect recruitment’

Published by rudy Date posted on July 14, 2011

MANILA, Philippines – The proposed reforms in the armed forces’ pension system would not affect the military’s recruitment efforts, even if these would reduce the benefits given to future retirees, a senior officer said yesterday.

Armed Forces of the Philippines (AFP) spokesman Commodore Miguel Rodriguez said soldiers enter the service because of the desire to serve the country and not because of financial rewards.

“What we are after is the opportunity to serve the country and not the salary,” Rodriguez told reporters via phone patch.

Rodriguez said the salary of soldiers remains attractive despite efforts to reform the retirement system and to reduce the government’s pension obligations.

“The pay (of soldiers) is good. A private first class earns P14,000 to P16,000 a month. We are happy that the government supported the needs of soldiers,” he said, adding that the proposed pension reforms would not discourage prospective soldiers.

The AFP Retirement and Separation Benefits System (RSBS) is pushing for a law that would reform the retirement system to address the ballooning pension arrears of the government.

The national government currently shoulders the benefits given to retired military personnel.

However, the amount of pension arrears is growing due to the increasing number of retirees. The government owes around P16 billion to about 112,000 military pensioners.

Officials also blamed the “indexation” provision of the current retirement law, which raises the benefits of retirees whenever the salaries of active soldiers are upgraded.

Under the RSBS proposal, the provision would be scrapped and pension increases will only be implemented every five years. The increases would be determined by the board of a new retirement body to be named Philippine Military Pension System.

RSBS president Emilio Marayag has warned that the government’s pension obligations might balloon to P1 trillion by 2040 if reforms are not implemented.

In contrast, he said the government would save millions if the pension rates were only adjusted every five years.

“Based on financial simulation, if the board of trustees (of the new retirement body) allows a 10 percent adjustment every five years, we can reduce pension arrears by P900 million by 2040,” Marayag said in an interview.

Other proposals of the RSBS include raising the compulsory retirement age to 58 from 56; raising the minimum years of service to 25 years from 20 years; and cutting of the survivorship benefit to 50 percent of a soldier’s pension from 75 percent.

The proposed reforms would only apply to incoming soldiers except the removal of the “indexation” provision, which would also cover active and retired soldiers.

Rodriguez expressed support for the reforms pushed by RSBS, saying this would ensure that the government could settle its pension obligations.

“We are looking at the capacity of the government to support the pension requirements. Reforms are being implemented to ensure that,” he said.

The RSBS was formed in 1973 by the late president Ferdinand Marcos to serve as a funding scheme for the payment of retirement and separation benefits to military personnel.

The payments are funded by deductions from soldiers’ salary. The pension fund collected five percent of a soldier’s basic monthly pay and ensured a six percent return upon retirement, plus pension benefits. –Alexis Romero (The Philippine Star)

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