Bill eyes to avert collapse of uniformed personnel pension system

By Filane Mikee Cervantes, 30 Apr 2021

MANILA – A bill creating a sustainable fiscal framework for the separation, retirement, and pension benefits of the military and uniformed personnel (MUP) was filed at the House of Representatives on Thursday.

House Bill 9271, otherwise known as the Saving the MUP Pension Act, sounded the alarm regarding a possible “total fiscal collapse” of the pension system if no reforms are enacted to save it.

In the explanatory note of the bill furnished the media on Friday, bill author and Albay Rep. Joey Salceda said “the pension system has a PHP9.6 trillion unfunded reserve deficit, primarily because uniformed personnel do not have a contribution system and that MUP pensions are much higher than that of the civilian personnel”.

Since 2018, Salceda noted that pension funding out of the General Appropriations Act has exceeded the maintenance and other operating expenses of the uniformed services, which means that the government is spending more to support retired personnel over operations of active personnel.

“This is a looming fiscal crisis. Without the reform, funding the pension scheme will become fiscally unsustainable, shrinking the economy by as much as 7.2 percent in the long-run. This is worse than what the economy sustained in the 2004 fiscal crisis and the 2008 global financial crisis,” he said.

The bill proposes the complete discontinuation of automatic indexation pension payments, which can be periodically reviewed and increased to a maximum of 1.5 percent per year.

It also proposes a mandatory contribution rate of 21 percent of gross salary, similar to that of civilian government employees.

It seeks to adjust the pensionable age to 56 years old, instead of the accumulation of at least 20 years of satisfactory active service, in the current MUP system.

MUP assets shall be used to supplement the budget for pension costs.

An MUP Trust Fund Committee shall be created to govern the fund, and the Government Service Insurance System shall be designated as manager of the MUP trust fund.

Salceda said that proposed reforms would make funding for the pension scheme more sustainable for the government, which could result in growth by as much as 2.1 percent in 2021 and 5.8 percent by 2030. (PNA)