Department of Finance (DOF) Secretary Benjamin Diokno assured on Tuesday that the proposed reforms to the military and uniformed personnel (MUP) pension system prioritizes the welfare of MUPs and also ensures fiscal sustainability.

“The goal is to craft a pension system that factors in the welfare of the military and uniformed personnel in active service and retirees, while making sure it is sustainable and can withstand the test of time,” Diokno said in a statement.

The Finance chief issued the statement as the House of Representatives ad hoc committee held its first hearing on the military and uniformed personnel pension reform bill Tuesday.

“The current MUP pension system’s dependence on full government funding exposes it to economic and fiscal downturns and compromises its stability and reliability,” he added.

According to DOF, pension arrearages amounted to PHP3.7 billion in 2021, PHP32.6 billion in 2022, PHP5.2 billion in 2023, with a projected PHP4.8 billion for 2024.

The creation of the MUP Trust Funds is one of the key reform proposals, according to Diokno.

“At the core of our reform package is the creation of separate pension funds that recognize the unique nature of military service, and provide retirement benefits that reflect the sacrifices by the military and uniformed personnel,” he said.

Diokno said these pension funds shall be funded through the military and uniformed personnel’s contributions with a corresponding government share, and supplemented by the proceeds from the sale or lease of MUP assets.

He also assured the soldiers, policemen and other uniformed personnel that while the reform bill will require them to give a contribution, this is beneficial to them because it gives them full ownership and vested rights over the pension fund.

The economic team is also exploring the possibility of introducing mitigating measures such as loan restructuring to ease the impact of mandatory contributions on personnel with heavy personal loans.

“The creation of a self-sustaining pension fund insulated from economic shocks and the budgetary process is key to ensuring that the State is able to honor its future promises to retirees and their dependents,” Diokno said.

The proposal also includes a uniform retirement age of 57 or upon accumulation of 30 years of satisfactory service for the MUP to encourage those in the active service to stay longer and ensure more experienced personnel are retained.

A periodic review of pension benefits and a possible increase of up to 1.5 percent per year shall also be conducted, subject to the evaluation of economic conditions and actuarial life of the pension fund, to keep up with inflation.

“The core objective of the government’s efforts to reform the pension system for military and uniformed personnel is to address the unsustainability and uncertainty of the current pension system. Through these reforms, we can ensure the timely delivery of fair retirement benefits to men and women in service, while gradually lessening the strain on the government budget over time,” Diokno said. (PNA)