Galvez appeals for ‘middle ground’ in proposed MUP pension system reform

Department of National Defense (DND) officer-in-charge Carlito Galvez Jr. on Monday asked lawmakers to look into a possible "middle ground" in connection with proposed new military and uniformed personnel (MUP) pension system.

Facing a Senate hearing, Galvez said no less than President "Bongbong" Ferdinand Marcos Jr. is "very much concerned" about the impact of the proposed new pension system to the morale of soldiers and policemen.

“The President also gave an instruction, that he is very much concerned on the impact of this MUP on the morale and welfare of our personnel and policemen and he wanted that there’s should be a continuous discussion to have the common ground,” Galvez said at a Senate hearing on the bills seeking to reform the current pension system for uniformed personnel.

In his opening statement, Galvez disclosed that 70 to 80% of the enlisted personnel of the Armed Forces of the Philippines (AFP) want to avail of early retirement to express “apprehension” to the proposals, which include  the removal of automatic indexation in pension and the imposition of mandatory contributions on military personnel.

Under the current MUP pension system, military men who rendered 20 years of service can already avail early retirement.

“While we fully support the enactment of legislative measures to address the current issues hounding the pension system, the DND and the AFP respectfully appeals that the morale and welfare of our soldiers be given due weight in this deliberation. Considering that the near notion of modernizing our pension system, it created already some sort of apprehension,” Galvez, a retired military general, said.

“At present, mere discussions of proposals related to retirement benefits, most especially the imposition of the pensionable age, has already affected the morale and caused uneasiness not only from within the active ranks of the Armed Forces, but even from our veterans and retirees,” he added.

“As much as possible we would want to appeal to our senators that we should really look on the possible middle ground that we can see the morale and welfare of our people will be taken care of.”

Galvez also disclosed some details from his meetings with AFP personnel and commanders, saying the military men wanted the new MUP pension system to cover only the new entrants. He also said there were adverse reactions to the proposal to reduce the amount of lump sum that will be given to the pensioners upon retirement.

The current system provides a lump sum to retirees amounting to 36 months of their salaries. The military men oppose the proposals to reduce it to 18 months, Galvez said.

“If this is still financially impossible, we are very amenable and open to modifications in the system so long as these are fair and equitable to the military and the MUP and also this is based on the financial soundness and scientific actuarial science,” Galvez said.

In March, Finance Secretary Benjamin Diokno said that Marcos is “okay” with the proposal to reform the pension system for the MUP as he warned that failure to address the ballooning cost of pensions for retirees could lead to a “fiscal collapse.”

Representing the Department of Finance at the hearing, National Treasurer Rosalia de Leon said they economic team is proposing to apply the new MUP pension system to active and new entrants; the adjustment of pension benefits by up to 1.5% within a given year, subject to evaluation of economic conditions and actuarial life of pension fund; MUPs to start receiving their monthly pension at 57 years old; and mandatory contributions for active personnel and new entrants.

The economic team is asserting that the pension benefits and adjustments were granted as “gift” under the full discretion of the national government without vested ownership of military and uniformed personnel.

The dependence on full government funding also makes the pension system susceptible to economic and fiscal downturns which creates an unstable and unpredictable benefit system for MUP and their dependents, she added.

Further, De Leon said the current design features pose serious threats to sustainability of the system, placing future generations of MUP and their families at risk.

To support the issues that they raised, De Leon told the committee that the unfunded liabilities of the MUP pension is at around P9.6 trillion or 53.4 percent of the country’s 2020 growth domestic product.

The economic team warned that the pension liabilities is expected to balloon further in the succeeding years. —KBK, GMA Integrated News