Unfunded MUP liability rises to P14 trillion

MANILA, Philippines — The unfunded liability of the pension scheme of the military and uniformed personnel (MUP) has risen to P14 trillion, cementing the need to reform the system and make it sustainable moving forward.

During the Pandesal Forum yesterday, Finance Undersecretary Cielo Magno reiterated the need to set up a mechanism that would ensure the sustainability of the retirement fund of MUPs.

Citing the latest actuarial study conducted by the Government Service Insurance System (GSIS), Magno said the unfunded liability is now at P14 trillion, up from P9.6 trillion in 2019.

It should be noted that actuarial studies are based on the expected cash flows of a pension fund and covers the needed resources based on the population, as well as future benefits for members.

The latest actuarial study is based on 437,457 active members, as well as 268,741 regular and survivorship pensioners, as also submitted by the MUPs.

“That P14 trillion is the amount that the government needs to pay,” Magno said.

As of now, 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.

“That’s why our appeal is that we remove the indexation for those in active service when they retire and have a mandatory contribution so we can reduce that P14 trillion in unfunded liability,” Magno said.

It should also be noted that the monthly pension of retirees are automatically indexed to the salary of the next in rank in the active service. Hence, salary adjustments for active personnel increase the funding requirement for retirees.

However, Defense Secretary Gilbert Teodoro earlier voiced opposition to the blanket contribution, as well as the removal of indexation.

The government allocates at least P140 billion per year to fund the MUP pension and Magno said the mandatory contribution would reduce the annual allotment, as well as the overall debt of the state.

The DOF also expressed openness to have the pension fund supplemented by the proceeds from the sale or lease of MUP assets, as suggested by the military themselves.

“If we can get the list [of assets] and see the potential income from those, then we can check the possibility of adjusting the possible contribution of the active MUP,” Magno said.

“But currently, we still don’t have the list from DND (Department of National Defense) . That’s why we cannot adjust and we keep on going back to the actual contribution,” she said.

Based on the proposal, new entrants will be mandated to contribute nine percent, complemented by a 12-percent share by the government.

For those in active service, the contribution will be staggered starting from five percent for years one to three, seven percent on years four to six, and nine percent afterwards.

The contributions for both are based on the MUPs’ monthly base and longevity pay.

Further, Magno maintained that there will be no reduction in the pension of those MUP who have already retired.

“That is their vested right and we will not change that,” Magno said.

“We recognize the contributions of our MUP in the society that is why we do not want them to be in a position where they will not be able to get their pension because of a fiscal crisis,” she said.