Diokno sees impact of MUP pension reforms by January 2024

Finance Secretary Benjamin Diokno said on Tuesday that the impact of the reform of the military and uniformed personnel (MUP) pension system will be felt by the first month of 2024.

“Now, how soon will it be implemented? I think we are pushing for this; the military pension reform is part of the top priority legislative agenda of the President, concurred in by Congress and we expect this to be passed before the end of the year, and so it will have an impact as soon as January of next year,” Diokno said during the Post-State of the Nation Address (SONA) Philippine Economic Briefing in Pasay City.

On Monday, Defense Secretary Gilbert Teodoro said the MUP pension reform bill, which would mandate uniformed personnel to contribute to the state-run pension system, would be passed into law by the end of the year. 

Pushing for the passage of the pension reform measure is President Ferdinand Marcos Jr.’s “first marching order” for Teodoro. 

In his second SONA, Marcos reiterated his appeal to Congress to support priority legislations including additional tax measures and the reform of the military pension system.

The President has said he wanted the AFP and the PNP to have a self-sustaining pension plan to avoid a scenario where the funds would be depleted

“That reform on military pensions is going to be a game-changer, okay. And this I said, this has been an elephant in the room. The previous administrations don’t want to talk about it, recognizing it’s difficult to push. But this President, having been elected with a majority of 60%—by the way, this is the first time that a Philippine president has won more than 50%, okay,” Diokno said.

“Because usually, we have several candidates and you can elect a president with only 25% voters, okay, voting for the president. This President was elected by 60% of Filipino voters. As they said, yeah, we have to address this issue once and for all otherwise, it will have a catastrophic impact in the future,” the Finance chief said.

The Marcos administration’s chief economic manager said reforming the MUP pension system will “open up a lot of fiscal space in the budget.”

“If my numbers are right, 2024, we have allocated something like P300 billion -– three hundred billion, that’s approximately $6 billion for the military pension,” Diokno said.

The economic team, headed by Diokno, had warned of the consequences of the pension payments, with the total yearly payouts expected to hit the P1-trillion mark by 2035 from P213 billion in 2023.

“I think so far, as we explained to them, that this is really for their own good – to make the pension system more sustainable in the future; and I think they are very recipient,” the Finance chief said.

“Well, there are three types of beneficiaries from this reform: Those who are already retired – we’ll not touch them, more or less, because that’s like a contractual obligation to them; those who are in active service will be asked to contribute gradually to the system; and those who are going to be recruited for the first time will pay the full amount of the benefit,” he said.

“That’s basically the way it will be structured. We have the treasurer, and my several undersecretaries have been going around and explaining to them. And so far, I think the results of the consultation are very encouraging,” he added.

Under the current system, the pension for retired MUPs is fully funded by the national government. It is also automatically indexed to the prevailing salary of incumbent personnel of similar rank.

Under the recommendations of the Department of Finance, the reform should apply to all active personnel and new entrants and should be required to contribute to their pension fund similar to pensioners of the Government Service Insurance System. —NB, GMA Integrated News