The Department of Finance (DOF) has asked state-run Bases Conversion and Development Authority (BCDA) to dispose of properties in former military camps in order to augment the ballooning pension of uniformed personnel.
“We are working with the BCDA—it was set up to basically help the modernization [of the military]. We are discussing with them what kind of assets they can assign to cover these liabilities,” Finance Secretary Carlos G. Dominguez III told reporters.
“We are starting to talk to them already. They own a lot of land—Fort Magsaysay [in Nueva Ecija], Fort Bonifacio [in Taguig City], so we’ll see what assets are there that can be utilized for this,” Dominguez added.
The Bureau of Treasury was also spearheading an ongoing study looking into the viability of a new pension system for uniformed personnel, possibly by including them under the coverage of the state-run pension fund Government Service Insurance System (GSIS), National Treasurer Rosalia V. de Leon said.
However, the GSIS had said that placing uniformed personnel under its coverage may cost it P4-7 trillion.
The Duterte administration was worried about the ballooning pension of uniformed personnel, such that the interagency Development Budget Coordination Committee (DBCC) is pushing for a seed fund worth trillions of pesos that will generate income for retired military officers.
In its Fiscal Risks Statement 2017 report, the DBCC noted that the “problem” on ballooning pension costs for uniformed personnel was “mainly attributable to the features present in all existing retirement laws of the uniformed services—pension entitlement of a retiree is automatically adjusted based on the prevailing scale of base pay for similarly ranked active personnel; pension is non-contributory in nature hence budget comes from the annual general appropriations of the government; and early entitlement to pension benefits even before attaining the compulsory retirement age of 56.”
The DBCC said that last year, uniformed personnel’s pension reached P71 billion, and was expected to more than double in eight years’ time to P187.9 billion.
“In view of the foregoing, a reform must be effected for a more sustainable pension system,” the DBCC noted.
According to the DBCC, a technical working group comprised of the DOF and the departments of Budget and Management (DBM), Interior and Local Government (DILG, and National Defense (DND), as well as the GSIS “recommended the creation of a seed fund necessary for the purpose of generating sufficient interest income to fund the annual pension requirements of all uniformed services.”
“According to the latest actuarial study conducted by the GSIS, if no reforms are introduced to the existing pension system, the seed fund shall require an amount equivalent to P5.57 trillion,” the DBCC said.
“However, if reforms are implemented, specifically the deletion of the automatic indexation feature, the formulation of a mandatory contribution and the designation of a minimum pensionable age, then the amount required for the seed fund is significantly lowered to P2.04 trillion,” the DBCC added. kga