Gov’t facing P9.6-trillion bill for military pension obligations

by Charmaine A. Tadalan, BusinessWorld, 2 Feb 2021

THE GOVERNMENT will need to set aside about P9.6 trillion to meet its obligations to retired military and uniformed personnel (MUP) if it does not reform their pension arrangements, a key senator said.

Citing an ongoing study of the Government Service Insurance System (GSIS), Senator Panfilo M. Lacson said the proposed pension system will need P9.6 trillion as seed money.

“The study suggests that Congress needs to appropriate more than P800 billion annually, for 20 years, if no changes or reforms are made to the pension system,” Mr. Lacson said Tuesday.

Mr. Lacson, chairman of the Senate’s committee on national defense and a former high-ranking policeman, was presiding over hearings to evaluate various pension-reform measures.

The study assumes a one-time infusion of the proceeds from the sale of MUP assets, generating about P14.98 billion.

The GSIS has yet to finalize the study pending data from the Armed Forces of the Philippines, Bureau of Fire Protection, Bureau of Corrections, and the National Mapping and Resource Information Authority.

“No matter how we look at the numbers, (they really are) overwhelming,” Mr. Lacson said.

National Treasurer Rosalia V. de Leon recommended that the government cancel the automatic indexing of pension levels with salaries of active-duty personnel, to keep the growth of pension obligations manageable.

An immediate halt in indexing means “the unfunded liability will be reduced by more than two-thirds from P9.6 trillion to P3 trillion,” she said at the hearing. She also recommended that MUPs make mandatory contributions to help fund their pensions.

Defense Secretary Delfin N. Lorenzana said he supports a removal of indexation against active-duty pay, but called for a mechanism to adjust for inflation.

Calling the removal of indexation “possible,” he added: “We should also put something in the law that will increase the pension of the pensioners, based on the price index. Maybe 5% that corresponds to inflation,” he said.

“Hindi na automatic but based on inflation para hindi naman masyado maiwan ‘yung pension nila (The increases won’t be automatic but they can be based on inflation, so pensions won’t be eaten into by rising prices).” —