Talks on MUP pension system reforms begin

A technical working group (TWG) is preparing for a consultation roadshow related to planned reforms of the military and uniformed personnel (MUP) pension system, with the aim of crafting a proposed law that will be acceptable to stakeholders.

Finance Undersecretary Maria Lualhati Dorotan-Tiuseco said in a press briefing that a meeting with representatives of the different services that would be affected by the planned reforms was set for today.

Tiuseco said such a meeting was called for an earlier date, but had to be set for Monday when more participants are available.

She said Finance Secretary Benjamin Diokno, through National Treasurer Rosalia de Leon, will preside over the TWG, where the office of Sen. Jinggoy Estrada will also be represented.

“We have invited the Armed Forces of the Philippines, with which we will start [the consultation process] by going through each service unit and then move on to the Philippine National Police [and the other uniformed services],” the lawyer said.

Aside from personnel of the AFP and the PNP, MUP also includes the officers and enlisted personnel of the Bureau of Jail Management and Penology, Bureau of Fire Protection, Philippine Public Safety College, Philippine Coast Guard and the Bureau of Correction.

Procedure

“We will iron out the procedure, but we will be conducting a roadshow and we expect to draw up a timeline during the TWG meeting,” Tiuseco said.

Last week, the International Monetary Fund (IMF) echoed Diokno in raising the alert on rising government liabilities related to pensions of MUP, which the multilateral lender said might crowd out spending for social and infrastructure initiatives.

Large share

Shanaka Jayanath Peiris, chief of the regional studies division at the IMF’s Asia and Pacific department, said they consider the need to reform the military pension system as one of the most important that the Philippine government is facing in addition to an ongoing, long-drawn tax reform campaign.

Peiris noted that MUP pensions are indexed to current wages and “kind of going up very fast.”

“At the moment it is already quite large, but could really balloon and eat a large share of the budget, if it is not addressed and reformed,” he said.

Diokno earlier warned of a “fiscal collapse” resulting from the MUP pension, which is an “unfunded” liability that is expected to exceed P1 trillion by 2035 from P213 billion in 2023.

By unfunded, the finance chief meant that the MUP is funded or shouldered fully by the government through borrowings, with no contribution from the pensioners themselves.

Diokno is pushing for a unified separation, retirement and pension system for the MUP, which means a reformed pension system “should apply to those in the active service and new entrants, and members across all MUP agencies.”