EDITORIAL- Pension reforms

For many years now, it’s been the elephant in the room, according to Finance Secretary Benjamin Diokno, with administration after administration looking the other way and leaving the issue untouched.

Under the administration of the country’s first post-EDSA majority President, who continues to enjoy immense popularity as reflected in surveys, Diokno is hoping to overhaul the pension system that is lopsidedly in favor of retired military and uniformed personnel or MUP. Diokno said this week that President Marcos has agreed to reform the pension system to narrow the country’s fiscal deficit.

For 2023, the Pension and Gratuity Fund for the MUP stands at P272.94 billion. That’s just slightly lower than the P296.3-billion outlay for public health this year, which is one of the biggest allocations in the national budget.

The MUP funding covers pension retirement gratuity and terminal leave benefits, separation benefits and incentives. MUP retirees’ pensions are automatically indexed to the salary of the next higher rank in the active service – meaning a one-star general gets the pension pegged to the salary of a two-star officer on active duty. Diokno wants this automatic indexation removed.

MUP salaries have risen considerably particularly under Rodrigo Duterte, and along with these the retirement pensions and benefits. One of the hidden costs of the revolving-door policy in both the military and police is that an officer who serves even for two months as the chief of the organization still gets the highest pension.

MUP do not contribute to their retirement fund – a situation that Diokno wants to correct in the proposed reforms that will require legislation. While those who risk their own safety and lay their lives on the line to protect the public deserve to retire with dignity, the amounts must be reasonable, especially when compared to what other government retirees and even those in the private sector are getting. These less privileged employees, throughout their working years, contribute to their own retirement fund.

Diokno, who warns that ignoring the issue would mean a continued ballooning of the fiscal deficit, noted that this year allocation for MUP pensions is higher by nearly 50 percent from the P183.94 billion in 2022. He pointed out that the outlay for the actual operating expenses of the military is smaller than the allocation for retirees.

The average monthly pension for low-ranking uniformed personnel is P40,000 a month – three times higher than the P13,600 for state workers under the Government Service Insurance System, and nine times more than the P4,528 for private sector pensioners under the Social Security System. Diokno is correct; it’s time to confront this elephant in the room.