MUP pension sustainable after 20 years, says DOF

MANILA, Philippines — It would take two decades before the pension system of the military and uniformed personnel (MUP) becomes sustainable, with the government expected to spend an extra P40 billion a year as counterpart contribution.

In a briefing, Finance Undersecretary Cielo Magno said it would take 20 years for the MUP pension to be sustainable under the proposed framework where those in active service and new entrants will contribute.

“Because you still have to pay for those who retired and then those in active service would be paying partially first,” Magno said.

“That would still reduce the overall burden because we already have a counterpart, although the bulk of that will still be paid by the government,” she said.

The MUP continues to enjoy the benefits of a pension system even without any contribution into the fund. As such, the government appropriates a budget annually to fund this.

Next year, some P164 billion has been earmarked for the pension and gratuity benefits of MUPs.

But with the reform proposal, new entrants will be mandated to contribute nine percent of their gross salary complemented by an 11 percent share by the government.

For those in active service, however, the contribution will be staggered starting from five percent, before increasing it to nine percent over the coming years.

“When the new entrants come in, they have to pay for 20 years to build their retirement fund. So it [pension fund] is fully sustainable, independent of budgeting, around 20 years,” Magno said.

On the other hand, Finance Undersecretary Maria Luwalhati Dorotan-Tiuseco noted that it would take a longer period of at least 60 years if only new entrants were mandated to contribute to the fund.

The government would also have to allocate at least P40 billion a year as its counterpart share. Such spending will be on top of the annual pension for those retired, pending a fund that could already support them.

“Right now, it really has no source and their pension is dependent on the funds available. There are years when we even have arrears,” Dorotan-Tiuseco said.

“It’s not just addressing the fiscal space, but making sure that we have a source to get it from when the time comes,” she said.

The House of Representatives already approved the consolidated MUP bill that was a fine-tuned proposal based on the emerging consensus developed by the economic team with different MUPs in the country.

The Senate has to pass its own version of the bill.

Recently, Defense Secretary Gilbert Teodoro expressed concern over some provisions of the bill.

Finance Secretary Benjamin Diokno, for his part, said there is a need to respect the legislative process.

“There will be other hearings, we don’t know what version will be passed by the House. In legislation, you don’t always get 100 percent of what you want. We have to compromise,” Diokno said.