DOF revisits MUP pension reform

MANILA, Philippines —  The Department of Finance (DOF) is again considering reforms in the pension system of military and other uniformed personnel (MUP) as the budget proposal for the sector next year could rise by over 60 percent.

Under the 2025 National Expenditure Program, the proposed allocation for the Pension and Gratuity Fund (PGF) is at P232 billion, up 62 percent from this year’s P143 billion.

The annual fund is meant for pension and retirement gratuity and terminal leave benefits, including separation benefits and incentives.

Given that the MUP pension system reform has yet to become a law, it remains included in the record P6.352 trillion budget for 2025.

“We are going through it again because if we increase civilian salaries, we expect our MUP salaries to increase and therefore computations will change,” Finance Secretary Ralph Recto told The STAR.

Recto is referring to the latest tranche of the salary standardization law, which effectively increased the pay of state workers until 2027.

However, the salary increase is not applicable to MUP and individuals engaged without employer-employee relationship and funded from non-personnel services budget.

Recto has yet to elaborate on the possible changes in the DOF’s proposal but maintained that “my stand is the same.”

“There is a cost to reform and a cost without reform. Then we also have to calculate all proposals from the House [of Representatives] and Senate,” Recto said.

The DOF’s earlier version 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.

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.

When he became finance chief in January this year, Recto pushed for the changes in the pension scheme of the MUP but only for new entrants, a deviation from his predecessor.

Last September 2023, the House of Representatives approved on second reading the MUP bill but removed a key provision that would require active members to contribute.

In the Senate, a counterpart measure is still awaiting second reading.

This means that the government is still expected to annually pay for the entire pension of MUP which remains automatically indexed to the salary rates of those in active service, and to which the MUP do not contribute part of their salary.