Divided over pension reforms

The Marcos administration has proposed a major overhaul of the pension system for military and uniformed personnel or MUP. The plan, which is still in its early stages, would require the MUP to contribute to their retirement fund, increase the retirement age, and remove automatic indexation of pensions to the salaries of active personnel.

Mixed reactions from MUP groups have met the proposal. Some have welcomed the changes, saying that they are necessary to ensure the long-term sustainability of the pension system. Others have expressed concerns about the impact of the changes on their benefits.

Presently, the MUP pension system is non-contributory, which means that the government pays for it entirely. This has led to a number of problems, including the fact that the pension fund is bleeding and running out of money.

At the same time, the MUP may be taking its toll on the government’s capability to deliver services to the general population as the MUP pension system eats up public funds.

Finance Secretary Benjamin Diokno previously issued a warning about an impending “fiscal collapse” brought on by the soaring pension payments to MUP, which are anticipated to reach P1 trillion annually from P213 billion this year.

By requiring the MUP to contribute to their retirement fund, the government hopes to increase the size of the pension fund and make it more sustainable.

As proposed, the MUP in active service presently would contribute 5 percent of their monthly pay to their retirement fund for the first three years of a plan to reform their pension system.

The new entrants to the uniformed services, on the other hand, would then be mandated to contribute 9 percent of their basic salary and longevity pay.

Looking at it, the DoF’s proposal would only roughly align the MUP pension with the system prevailing in the public and private sectors. Other government employees contribute 9 percent of their monthly salaries, while workers in the private sector contribute 4.5 percent of their monthly pay.

MUP in the Philippines may take note, too, that their counterparts in other countries, for example, the United States, also fund in part their pension system.

American uniformed personnel contributes 5 percent of their salary to fund their pension, with the government shouldering 17.25 percent.

On the matter of increasing the retirement age of the MUP, the government hopes to reduce the number of people receiving pensions at any given time.

It’s an aberration, the fact that members of the uniformed services retire at age 56, way younger than other government employees who may opt for early retirement only at age 60 before being mandated to fully retire by 65.

As if that’s not enough — of the MUP retirees enjoying their pension fund longer than the rest of those in government — their pensions are also indexed with those of the same rank in active service.

By removing automatic indexation, the government hopes to prevent pensions from rising too quickly.

The proposed reforms may be a positive step towards ensuring the long-term sustainability of the pension system for MUP. However, it is important to note that these reforms will have a significant impact on MUP benefits.

There would be grumblings surely. As such, it is essential that MUP groups are consulted and their concerns are addressed before any changes are made to their pension system.

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