government debt

Public debt to rise unless military pension overhauled, warns Diokno

Ralf Rivas

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Public debt to rise unless military pension overhauled, warns Diokno

FINANCE CHIEF. The Commission on Appointments confirms the ad interim appointment of Benjamin Diokno as secretary of the Department of Finance, November 23, 2022.

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Pension spending for retired military personnel exceeds spending to equip personnel who are in active service

MANILA, Philippines – Finance Secretary Benjamin Diokno warned that the current pension system of the military and uniformed personnel (MUP) would inflate public debt by as much as 25% by 2030, emphasizing the risk of fiscal collapse unless reforms are made.

The Marcos administration’s economic managers are looking to lower the debt level relative to the size of the economy, after the Duterte administration’s borrowings amid the pandemic.

Diokno noted that MUPs do not contribute a single peso to their pension system. Pension benefits are allocated annually through the General Appropriations Act or national budget.

The average monthly pension of retired MUPs is around P40,000, 8.8 times higher than the average pension received by those paying under the Social Security System and 2.9 times higher than the average pension under the Government Service Insurance System.

Moreover, MUPs are automatically granted one rank higher upon retirement. They also receive their pension after being in service for 20 years, with no minimum pensionable age.

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Diokno said the current level of pension spending exceeds the spending to equip personnel who are in active service. In 2021, spending for MUP pension reached P160 billion, 38% higher than the spending on maintenance and other operating expenses and capital outlays of P116 billion.

The Bureau of the Treasury estimated that the level of total unfunded pension liabilities was around half of the Philippines’ gross domestic product in 2022. 

“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 said.

“The effects of borrowing for pension liabilities cascade to succeeding years and are sensitive to higher interest rates.”

Diokno said a unified separation, retirement, and pension system for MUPs in active service would resolve these financial risks.

Diokno said that he, along with Department of National Defense Officer-in-Charge Carlito Galvez Jr., Interior and Local Government Secretary Benhur Abalos, budget officials, and representatives of the Office of the President are set to discuss a “reasonable proposal” on the matter in the coming week.

Diokno earlier said President Ferdinand Marcos Jr. is “willing to spend his political capital” to finally push the long-running proposal of military pension reform. –

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Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.