AFP must seek other ways to fund pensions

BORACAY, Aklan - The Armed Forces of the Philippines (AFP) may have to look for other ways to fund the pension of military retirees as the tapped bank trustee said it is impossible to get the AFP’s expected yield in trust fund interest alone.

An eight to nine percent interest is unlikely, Reynaldo G. David, Development Bank of the Philippines (DBP) president and chief executive officer, told The STAR in an interview.

Last month, the military leadership declared it will depend on the interest from the trust fund the AFP will place in DBP to bankroll the pension of retired soldiers and officers after it closes the Retired Savings and Benefit System (RSBS) at the end of the year.

In an earlier press briefing, Defense Secretary Avelino Cruz Jr. said the trust fund the military will place with the state-run bank will be more than enough to meet the pension requirements of all the retirees.

David said he has not spoken with anybody from the military regarding the trust fund despite the fact that the decision to set up a trust fund with the DBP was made public more than a month ago.

"They just called me this week asking for a meeting. I will talk to them next week," David said.

Aside from managing the trust fund, RSBS will also ask DBP to be the trustee of their assets whose book value is estimated to be at P11 billion.

When asked for the assets fair market value, Cruz said the study is not yet ready and that the financial statements of the fund as of 2005 remains unaudited.

Although formal talks between DBP and the military have yet to push through, RSBS was already ordered to turn over its assets to the state-run bank for disposal.

A major chunk of the P11-billion assets or P9.62 billion is invested in real estate and real-estate firms while P1 billion is in uncollectible loans.

A loan is considered uncollectible or a non-performing loan (NPL) if it has remained unpaid for more than 90 days after becoming due.

RSBS declined to divulge the amount of the funds total loans. They also refused to identify the delinquent borrowers.