DND wants bill reforming AFP benefit system prioritized

MANILA, Philippines -  The Department of National Defense (DND) has proposed a bill to reform the military’s retirement system that could be part of the priority measures of Congress to improve the management of the government’s pension program.

DND spokesman Eduardo Batac said amendments to the current retirement law are needed to address the increasing pension obligations of the government.

“Definitely (retirement system reform should be a priority bill). It (increasing pension obligations) affects the perceptions as far as the DND is concerned,” Batac told The STAR.

Batac explained that some sectors are questioning the huge budget of the DND but a huge part of the funds goes to the pension of military personnel.

“Imagine, out of a budget of more than P100 billion, about 40 percent of that goes to pension so in the eyes of other people or other sectors, they would ask why the budget is that huge. They don’t know that about 40 percent is allocated to pension alone,” Batac said.

“You can’t avoid that (allotting funds for pension) because it is the obligation of the state to provide pension benefits,” he added.

Batac said a DND team is finalizing the proposed reforms to the retirement law, which is intended to reduce the government’s growing pension arrears.

“We will have to present our position to them (Legislative Executive Development Advisory Council) and they may input it in the legislative agenda,” he said.

The government shoulders the benefits given to retired military personnel. However, the amount of pension arrears is growing due to the increasing number of retirees. There are about 4,000 to 5,000 new retirees every year.

The government has allotted some P24 billion for pension requirements this year.

The government owes around P16 billion to about 112,000 military pensioners.

Emilio Marayag, president of the military’s Retirement and Separation Benefits System (RSBS), said reforming the retirement system is necessary since the government may be spending too much on retirees’ benefits.

Marayag said the government might no longer afford to shoulder its ballooning pension obligations soon if reforms are not implemented.

“If the government says I cannot provide pension anymore then they

(retirees) cannot receive the pension they are expecting. There will be frustration. If you’re retired you can’t do anything anymore,” he said in an earlier interview.

Marayag warned that the government’s pension obligations could balloon to P1 trillion by 2040 if reforms are not implemented.

To address the government’s pension arrears, RSBS called for the scrapping of the “indexation” provision of the current retirement law, which raises the benefits of retirees whenever the salaries of active soldiers are upgraded.

Under the RSBS proposal, pension adjustments would only be implemented every five years.

Marayag said the government would post millions in savings if the pension increases are implemented only every five years.

“Based on financial simulation, if the board of trustees (of the new

retirement body) allows a 10 percent adjustment every five years, we can reduce pension arrears by P900 million by 2040,” he said.

RSBS data showed that the average increase of pensions in the last 30 years is 11.5 percent for officers and 16.4 percent for enlisted personnel. Such adjustments meant more obligations for the government, RSBS said.