House to adopt DND’s comments on MUP pension bill

TO SERVE AND PROTECT. At least 80 rookie police officers take their oath during the 1st Cycle Attrition Recruitment Program at the Police Regional Office 12 (Soccsksargen) headquarters in General Santos City on Nov. 14, 2022. The government will have a bigger share under the proposed reforms to the military and uniformed personnel pension system, the Department of Finance said. (Photo: PRO-12/Facebook)

MANILA – The House of Representatives will adopt the changes proposed by Department of National Defense (DND) Secretary Gilberto Teodoro Jr. to the substitute bill on military and uniformed personnel (MUP) pension reform.

Teodoro’s proposal regarding the indexation and transition phase will be introduced as House floor amendments to the bill as the committee already terminated its proceedings, chair of the House Ad Hoc Committee on the MUP Pension System, Albay 2nd District Rep. Joey Salceda, said Tuesday.

“As chair of the Ad Hoc Committee, I would like to assure the Secretary that his requests are acceptable. We will adopt the Teodoro proposal of indexation for all retired and retireables (individuals eligible for retirement) and a transitioned contribution scheme,” Salceda said.

In a statement last week, Teodoro expressed concern over the proposed mandatory contributions for military personnel, which includes those who have already completed at least 20 years of active service.

“The President (Ferdinand R. Marcos Jr.) envisions a carefully transitioned introduction of any pension reform plan so that those in active service will be impacted in the least possible way. The imposition of mandatory monthly contributions without a transition phase will definitely have an impact on our soldiers,” he said in a statement.

Teodoro also said looking after the welfare of military pensioners is part of his duties as DND chief.

“It has been my position that their pensions and entitlements, including 100 percent automatic indexation, shall remain unchanged. Ensuring the non-diminution of their retirement benefits is the least we can do in recognition of their sacrifices to the country,” he said.

Under the current pension system, the pensions and benefits of MUPs are fully funded by the national government through annual appropriations.

MUPs are also automatically promoted one rank higher upon retirement. The monthly pension is automatically indexed to the salary of those in active service.

Under the approved substitute bill, the indexation of the pension of the MUPs shall be at 50 percent.

The bill also proposes that MUPs would be required to contribute 5 percent for the first three years, 7 percent for the next three years and 9 percent thereafter for active personnel while new entrants would contribute 9 percent of their base and longevity pay for their pension.

As a counterpart, the government will chip in 16 percent for the pension of those in active service during the first three years, 14 percent during the fourth to sixth year and 12 percent for the seventh year and onwards.

The government will contribute 12 percent for new entrants.

Salceda said Teodoro’s proposal would add some PHP1.2 trillion more to the actuarial reserve deficiency, from the current PHP2.2 trillion under the substitute bill.

He said he would still clarify with the Department of Finance (DOF) and the DND exactly what the request is regarding contributions or indexation.

“We are hearing clarifications that they just want to ensure that those who have given 20 years of service or more will not pay contributions or be subject to lower indexation. Our initial impression from the statement is that they don’t want anybody from the active service to pay any contribution or to give up any amount of indexation,” he said.

He also pointed out that there could be “some pushback” from the DOF and the economic managers on the Teodoro proposal.

“We hope that within the executive, they will sort their position out,” he said.

He reiterated that fiscal sustainability aims to ensure that the pension system is “substantially preserved in a way that can still be guaranteed by the State,” which would entail a reform that is “not too expensive, but also not too disruptive.”
“I need a figure that still allows me to protect the reform’s three guarantees: Guaranteed salary increase, guaranteed pension increase, and guaranteed funding source. So, moving forward, any additional proposals should bear the costs in mind,” Salceda said.