DOF pushes for MUP pension reforms, warns of fiscal collapse

Finance Secretary Benjamin Diokno stated that the current military and uniformed personnel (MUP) pension system is fiscally unsustainable and that the government will push for reforms in Congress to prevent a potential fiscal crisis.

“The current pension system is fully funded by the government. That means it is appropriated annually in the budget, but there is no contribution from the retirees,” Secretary Diokno said during a press briefing with the Malacañang Press Corps (MPC) on March 28, 2023.

Secretary Diokno shared that the President recognizes the urgency of the matter and has approved in a Cabinet-level meeting the proposed reforms to the MUP pension system.

The current MUP pension system covers retirees from the Armed Forces of the Philippines (AFP), Bureau of Jail Management and Penology (BJMP), Bureau of Fire Protection (BFP), Philippine National Police (PNP), Philippine Public Safety College (PPSC), Philippine Coast Guard (PCG), and the Bureau of Corrections (BuCor).

It is fully funded by the National Government (NG) and is automatically indexed to the salary of the active personnel of the same rank.

The pension amount is automatically pegged according to the current salary of the personnel of similar rank in active service. Therefore, when the salary of the armed services doubled in 2018, this also reflected in the pension of retired personnel.

Pensions can be received after 20 years of service without a minimum pensionable age requirement.

MUPs are also automatically promoted one rank higher upon retirement, which means that the pension to be received will be equivalent to the salary of the next level.

Secretary Diokno cited the AFP’s example in which the current maintenance and operating expenditures are less than the pension amount for retirees.

“It’s not sustainable. If this goes on, there will be a fiscal collapse,” Secretary Diokno stressed.

According to him, the average monthly pension of MUPs is almost nine times higher compared to Social Security System (SSS) retirees and three times higher than Government Service Insurance System (GSIS) retirees.

The government proposes the following:

1. The reform shall apply to all active personnel and new entrants.
2. Removal of automatic indexation of pension to the salary of active personnel of single rank.
3. MUPs will receive their pension starting at 57 years old.
4. Mandatory contributions will be required for active personnel and new entrants similar to GSIS pensioners.

Secretary Diokno said that he met with Department of the Interior and Local Government (DILG) Secretary Benhur Abalos and Department of National Defense (DND) Secretary Carlito Galvez Jr., who both agreed to the proposals.