GSIS President Jose Arnulfo “Wick” Veloso (INQUIRER FILE PHOTO)
MANILA, Philippines — As the government scrambles to reform the pension system for military and uniformed personnel (MUP) to avert a fiscal crisis, the state-controlled Government Service Insurance System (GSIS) has suggested that it simply replicate the current premium contribution structure for state workers.
GSIS President Jose Arnulfo “Wick” Veloso said the MUP system must be aligned with the contribution rate payable by GSIS members and their government employers, amounting to 9 percent and 12 percent, respectively, of the actual monthly salary of the contributing member.
“This is to be consistent with everyone else in the government,” Veloso said in an interview with the Inquirer. “That is the most logical, if you are going to have a basis, it [should] be the rest of the government.”
However, Veloso said it was ultimately up to Congress to structure the MUP pension system.
A Senate measure seeking to reform the MUP retirement scheme has been submitted to a technical working group for discussions, with representatives from the government’s economic team and the uniformed services being consulted on the matter.
Resistance
“It’s not for us to decide. We are just the managers so we have nothing to discuss regarding the contribution, on whether it will be grandfathered,” Veloso said, referring to another proposal that whatever structure would be introduced should be applicable only to incoming MUPs.
President Ferdinand Marcos Jr. earlier favored GSIS’s participation in the multisectoral discussions on the MUP pension reform, noting that its experience and acquired skills “have been an important part of this ongoing process.”
The current MUP pension system covers retirees from the Armed Forces of the Philippines, the Philippine National Police, the Philippine Coast Guard, the Philippine Public Safety College, and the bureaus of jail management and penology, of fire protection, and of corrections.
“The indexation is the most difficult part,” Veloso said, referring to the provision that pegs the retirees’ monthly pension to the current salary of those occupying the next higher rank.
Once removed as proposed by the executive department, a person retiring as a colonel, for example, will get a pension equal to the salary of a colonel — not that of the next higher rank, a one-star general.
The executive branch likewise recommended that the MUP pension system reforms cover both active personnel and new entrants, with all of them making contributions for their pension — a move opposed by uniformed personnel who argued that the new pension system should be applied only to new entrants.
Financing shortfall
At a Senate hearing last month, Undersecretary Carlito Galvez Jr., then the officer in charge of the Department of National Defense, warned that up to 80 percent of military servicemen were looking at availing themselves of optional retirement to lock in their benefits before the government revises their pension system.
The MUP system is fully funded by the national government, unlike the GSIS and the Social Security System whose members contribute part of their monthly salary to the retirement fund.
The pension amount is automatically pegged to the current monthly pay of personnel in active service. When the salaries of the armed services doubled in 2018, this was also reflected in the pension of retired personnel.
National Treasurer Rosalia de Leon had earlier said that the funding required to pay for MUP pensions has been growing at a “fiscally unsustainable rate,” with the unfunded liabilities already estimated at P9.6 trillion as of 2020, prompting current efforts to reform the retirement scheme.
Veloso said the GSIS was also preparing to manage funds from the prospective MUP system.
“If they ask us to manage the funds there are two possibilities: invest it and let them distribute the proceeds to different members. The other is we invest [and] also distribute to their members, and I won’t reinvent the wheel, I will get their existing staff to do that,” he explained.
However, Veloso noted that each of the entities under the MUP system had different policies.
“So you have to structure it accordingly,” he said.