Ledac eyes reforms in AFP, PNP pension system

BY MAYVELIN U. CARABALLO, Manila Times, Feb 20, 2017

Budget Secretary Benjamin Diokno said reforms in the uniformed personnel’s pension system are part of the priority bills that will be pushed by the Legislative-Executive Development Advisory Council (Ledac).

“The Ledac agreed that there should be a review of the pension system for uniformed personnel,” he said in a forum last week.

At present, the pension of soldiers and policemen come from the national budget.

“This is not sustainable, because the day will come when 70 percent of their budget will just go to the pension,” Diokno said.

For this year, the Philippine National Police (PNP) was allotted a budget of P110 billion, while the Department of National Defense (DND), which exercises authority over the Armed Forces of the Philippines, got a budget of P137.2 billion.

Diokno said that the government is considering placing policemen under the Government Service Insurance System (GSIS).

“The constitution says that the PNP is civilian in character, so why doesn’t GSIS absorb the PNP in the first place, right?” he said.

“We’re talking about this because we’re trying to look for a permanent solution. We will not burden the Filipino people with this problem, so as soon as possible we’ll look for the appropriate solution,” he added.

Diokno’s statement is in line with a Bureau of the Treasury fiscal risk report released last year that revealed that the pension costs of all uniformed services are rapidly increasing every year.

The report said the problem of the pension system can be attributed to the “features” in the retirement laws of the uniformed services such as the automatic adjustment of a retiree’s pension based on the prevailing scale of base pay for similarly ranked active personnel and early entitlement to pension benefits even before a retiree attains the compulsory retirement age of 56.

The report said the Technical Working Group composed of the Departments of National Defense, Budget and Management, Finance, Interior and Local Government and the GSIS recommended the creation of a seed fund that will generate sufficient interest income to fund the annual pension requirements of all uniformed services.

“According to the latest actuarial study conducted by GSIS, if no reforms are introduced to the existing pension system, the seed fund shall require an amount equivalent to P5.57 trillion,” it said.

However, if reforms are implemented, specifically the deletion of the automatic indexation feature, the formulation of a mandatory contribution and the designation of a minimum pensionable age, the amount required for the seed fund will only be P2.03 trillion, it added.