The Department of Finance (DOF) remains hopeful the problem on the military and uniformed personnel’s (MUP) current pension scheme will be resolved within the current administration’s term.
Asked by reporters over the weekend if the MUP pension issue would “see a light at the end of the tunnel” before the Duterte administration’s term ends in mid-2022, Finance Secretary Carlos Dominguez said: “I hope so.”
According to the Development Budget and Coordination Committee’s fiscal risk statement for 2022 posted on the Department of Budget and Management’s (DBM) website, the inability to reform the current MUP pension scheme was cited as one of the downside risks to the country’s fiscal position.
The report also said aside from the MUP pension issue and the fiscal impact of the COVID-19 crisis, other downside risks are the changes in the revenue allocation and expenditure devolution to local government units, and prohibition on certain expenditures in line with the conduct of the 2022 national elections.
The report pointed out that several pending proposals seek to provide all MUP with adequate remuneration and benefits through the revamping of the current retirement benefits and pension scheme.
The report said a 2020 DBM position paper recommends, among others, that the financial sustainability of the proposed contribution of the national government should be revisited.
Said contribution rates vary across bills but generally range from 18 percent to 27 percent of the monthly base pay of the MUP, which is exorbitantly high when compared to the civilian rate of 12 percent of the monthly basic salary.
“This will result in the ballooning of retirement and pension requirements over the next few years, without the correlative funding sources to support them. In fact, the creation of the retirement fund will necessarily result to an additional requirement of P45 billion annually, according to the actuarial study by the DOF,” the report said.
The report said it was recommended that a MUP Fund Authority administer and oversee the MUP retirement funds.
“Given the increased need for solvency in the MUP retirement funds, the DBM has recommended that instead of creating a MUP Fund Authority, the Government Service Insurance System (GSIS) should be tapped to serve as fund administrator considering its actuarial, investment and fund management expertise and experience,” it said.
“It is also prudent to have it be managed by the GSIS so that administration of the retirement and pension systems are holistic and overseen by one central agency,” it added.
The report however said GSIS remains firm in its position that there should be no “co-mingling” of funds, and that any pension fund to be established for MUP should be separate and distinct from the existing Social Insurance Fund for the civilian employees in government.
“We also note that further meetings need to be conducted between policymakers and various stakeholders in order for all parties to arrive at a consensus relative to MUP Reform bill,” it said. – Angela Celis
