DOF exec exit unlikely to stall MUP pension reform

MANILA, Philippines — The move to address the pension scheme of the military and uniformed personnel (MUP) is unlikely to hit a brake even with the exit of a key government official leading the reform.

In an interview with ‘The Chiefs’ on One News over the weekend, former finance undersecretary Cielo Magno said the MUP reform proposal would not be affected even with her resignation.

Over the past months, Magno was among the lead DOF officials meeting with MUPs to address the reforms needed.

“Probably not because we are not the legislators,” Magno said.

“The responsibility to produce a new law with respect to the MUP pension program is with Congress,” she said.

The House of Representatives already started plenary deliberations on the MUP reform with the ad hoc committee on the MUP pension system chairman and Albay Rep. Joey Sarte Salceda defending the bill.

The bill proposes a guaranteed annual salary increase of three percent for MUP for 10 years and an adjustment of the mandatory retirement age from 56 to 57 years old upon accumulation of 30 years of service, whichever comes later.

The House version of the bill is also pushing for a gradual transition to the contributory scheme to supplement the funding sources of the MUP pension system.

It also covers the establishment of two separate trust funds: the Armed Forces of the Philippines Trust Fund and the Uniformed Personnel Services Trust Fund.

The bill also calls for the creation of the MUP Trust Fund Committee to oversee the MUP trust funds, with the Bureau of Treasury serving as the secretariat of the committee and the Government Service and Insurance System (GSIS) as fund manager.

Last week, Magno was supposed to meet with retired generals to find a common ground as the DOF continues to get the support of various MUP stakeholders.

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.

In her interview one week after leaving the DOF, Magno explained that the move to make MUP contributions mandatory is not unique to the Philippines as other Southeast Asian countries and even the US are practicing the same.

It should be noted that in the 1970s, the GSIS actually covered the military.

“Eventually they were removed because their risk profile is different compared to regular civil servants and they started to erode the pension,” Magno said.

Nonetheless, Magno, who is now back at the University of Philippines- School of Economics, argued that savings and pension are just the same.

“That’s the theoretical reason why we have pensions. Sometimes consumers and individuals are very myopic that we are just concerned with the now, we don’t think of what will happen to us when we retire,” Magno said.

Further, the ex-DOF official defended Finance Secretary Benjamin Diokno’s warning of a possible fiscal crisis should the MUP pension be not addressed.

This, as some MUPs have been dubbing Diokno as “exaggerated” over such claims. Magno noted that Diokno was not the first to acknowledge the pension system would lead to a fiscal crisis.

“If you look at the EO (executive order) of (late president Benigno) Aquino when he adjusted the allowances for the military, there’s recognition that we are adjusting the allowance instead of the base pay because of a potential crisis,” Magno said.

“So, it was not an original warning of the fiscal crisis from Secretary Diokno,” she said.

Latest GSIS actuarial study showed that the unfunded liability of the MUP pension is now at P14 trillion, up from P9.6 trillion in 2019.

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