MANILA, Philippines – Congressional leaders and members of President Ferdinand Marcos Jr.’s economic team broke the impasse on the ambitious push to reform the pension system of military and uniformed personnel (MUP), Speaker Martin Romualdez said on Wednesday, August 2.

In a statement, Romualdez said the consensus on how to fund the reforms was reached following a three-hour meeting, but he did not specify the funding source.

“Our soldiers and uniformed personnel are now assured: their pension plan are now fully funded. Not only in 2023 or 2024, but in years to come,” Romualdez said.

House ways and means panel chairperson Joey Salceda will chair an ad hoc committee to finalize other details of the reforms.

“It guarantees three things: sure salary increase, sure indexation of pensions, and sure funding for the pension system,” Salceda, who the Speaker’s office said “offered the win-win formula,” said in a separate statement.

Why is there a need for reform?

The current MUP pension system – which has been described by Finance Secretary Benjamin Diokno as the “most generous” in the world – is simply unsustainable, and is at risk of fiscal collapse.

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The national government fully funds the pensions of MUPs, and uniformed personnel on active duty do not contribute to the fund.

A retired personnel’s monthly pension is automatically “indexed” to the salary of a person of the same rank. This means that when an active personnel’s salary gets a raise, the retired officer’s pension rises as well.

MUPs are those who belong to the Armed Forces of the Philippines, Bureau of Fire Protection, Bureau of Jail Management and Penology, Philippine Coast Guard, the Philippine Public Safety College, the Bureau of Corrections, and the Philippine National Police.

Military pension spending in 2022 reached P164 billion, already outpacing maintenance and other operating expenses (MOOE) and capital outlays.

But the military has serious apprehensions towards past and even current proposals, and the government risks the possibility of a mass early retirement among MUPs should they find the reform disadvantageous to them.

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Marcos has made pension reform a priority, and is “willing to spend his political capital” to make it happen, according to Diokno. – Rappler.com