DBM wants cops, soldiers to fund their own retirement

Aika Rey

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DBM wants cops, soldiers to fund their own retirement
Taxpayers, like you and me, are the ones paying every year for the retirement fund of the military and police, budget chief Benjamin Diokno says

MANILA, Philippines – Every year, the government allocates P90 billion in the national budget for the retirement fund of soldiers and policemen.

But that’s just part of the story. Budget Secretary Benjamin Diokno told reporters on Wednesday, September 20, that “(T)he unfortunate part right now is that (uniformed personnel) are not paying and not contributing anything to the pension fund.”

That is why Diokno said the Department of Budget and Management is drafting a law to address the ballooning funds needed for the pension of the military and the police to make it “sustainable.” 

Diokno said this means taxpayers are the ones paying for the uniformed personnels’ pension.

“If they (policemen and soldiers) are not contributing anything right now, it means that you pay something like P90 billion a year for their retirement. You pay for this,” he said.

He also said that if measures will not be set up, 50% to 60% of the future budget of the military will go to pension. He proposes new recruits of the military and the police to contribute to the pension fund.

With the looming increase in salaries for cops and soldiers, Diokno said that the amendments should be done as soon as possible.

“It will require legislation. We are drafting a legislation… We intend to file the bill before the end of the year,” he said.

Proposed measures

Among the reforms eyed is the removal of the automatic indexation feature and the transferring of military pension to the Government Service Insurance System (GSIS).

The automatic indexation system is the feature that automatically adjusts a retiree’s pension to match the prevailing salary of an incumbent personnel of similar rank.

However, Diokno said that the GSIS “might not want to take over the military pension fund” as P7-trillion additional funding is needed for the program.

“We have to identify the assets of the military to fund the P7 trillion (and) pledge it to GSIS. A big part of it will come from the budget but some parts you can pledge assets so (GSIS) will take over the responsibility of military pension fund,” he said.

Diokno attributes this problem during the administration of former President Fidel V. Ramos as the Armed Forces of the Philippines invested in properties that did not yield high returns. (READ: AFP yet to recover P105M paid to dead pensioners – COA)

The pension fund collapsed as an aftermath of the 1997 Asian financial crisis and since then has been directly sourced from the national budget. The problem was also ignored by other administrations, Diokno said.

In 1973, then President Ferdinand Marcos issued Presidential Decree No. 361 creating the Armed Forces of the Philippines – Retirement and Separation Benefits System. 

It was later deactivated in 2007 during the term of Gloria Macapagal-Arroyo as it failed to deliver its mandate to take care of retirement benefits of its members.– Rappler.com

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Aika Rey

Aika Rey is a business reporter for Rappler. She covered the Senate of the Philippines before fully diving into numbers and companies. Got tips? Find her on Twitter at @reyaika or shoot her an email at aika.rey@rappler.com.