Diokno to MUP pension reform critics: No system in the world allows non-contribution

MANILA, Philippines — Finance Secretary Benjamin Diokno has maintained that the country needs to reform the military and uniformed personnel (MUP) pension, saying that there is no system in the world where possible recipients of a pension do not contribute to it.

Diokno, during the Kapihan sa Manila Bay forum on Wednesday, was asked about senators’ fears that mandating contributions from MUPs may lead to instability in the country’s civilian and military law enforcement institutions — with the possibility of mass retirement among the country’s key forces.

READ: Pension share woes to weaken security sector, senator warns 

The Department of Finance (DOF) chief, however, said that these issues are the reason why they continue to discuss the matter with MUP officers and officials, to let them understand the necessity of the contributions.

“I call that an elephant in the room because previous administrations don’t want to tax it, but it’s a huge problem.  Right now, we estimated the unfunded liability of that fund is something like P9 trillion […] hindi pa siya na-kolekta (we have not collected it); it’s our liability sa mga nag-retire (to those who retire).  That’s the worth of the retirement fund,” Diokno explained.

“Kaya nga natin kinakausap sila (MUPs) pero they have to contribute.  Hindi naman pwedeng kang (nag-avail) ka ng pension mo na hindi ka nag-contribute sa system.  There is no such thing as a pension system like that,” he added.

(That’s why we are talking to them, but they have to contribute.  It is not sustainable to avail of a pension that you did not contribute to the system.  There is no such thing as a pension system like that.)

According to Diokno, plans to reform the MUP pension are not new, but past administrations failed to implement it since MUPs were allowed to stop contributing during former president Fidel Ramos’ term.

“(This is) unfunded because MUPs stopped contributing during the time of Ramos; the military did not contribute to their own pension, but every year people retire, and they make claims, and every year it is being appropriated.  After Ramos, Erap, it was too short.  GMA, it was too long, but they didn’t move it, maybe because they cannot,” he said in a mix of English and Filipino.

“Ngayon si (Now with) President Bongbong (Marcos Jr.), I told him ‘this is the elephant in the room, we have to address this.’  And he said, ‘we will address it.’  What we have done is we’re having extensive consultations with the affected parties,” he added

Diokno also reiterated that they are looking at a gradual imposition of the contribution rate, starting from five percent, then seven percent, and then nine percent over a period of nine years.

READ: MUP pension: DOF sets contributions at 5% to 9% 

This means that if the MUPs shouldered the five percent of the officer’s salary deduction, the government would supply the remaining 16 percent.  Monthly pension contribution usually accounts for 21 percent of a worker’s salary, especially in government.

Once the contribution is elevated to seven percent of the worker’s salary, the government would then provide the remaining 14 percent; and for nine percent, the government would shoulder the 12 percent.

However, these changes would not apply to those who have retired already.  Also, new recruits from the law enforcement institutions like the Armed Forces of the Philippines, the Philippine National Police, the Philippine Coast Guard, the Bureau of Jail Management and Penology, and the Bureau of Fire Protection would contribute the nine percent immediately.

“The model that we want is for those who are already retired; we would not compel them to contribute because that seems like a contractual obligation that is separate.  Now those who are in active service and those who will be recruited, they will contribute.  Those in the active service, the plan is five, seven, and then nine percent of their income,” Diokno said.

“But for a new entrance, new recruits, they would immediately give nine percent.  But we are still finalizing the bill, and that would be presented to the next Congress (session),” he added.

The possibility of the MUP pension drying out was raised by Diokno to Marcos, who then called for a meeting to discuss possible reforms to the pension fund.  However, several lawmakers, including Senator Ronald dela Rosa — a former PNP chief — and Senator Robinhood Padilla feared that MUPs would just retire to be spared from the pension fund contribution changes.

READ: Meet set as DOF chief warns vs ‘unsustainable’ MUP pension 

READ: Marcos warns of MUP pension depletion if reforms not done 

Then on Monday, Senator Jinggoy Estrada said enlisted personnel have opposed the administration’s plan to deduct part of their salaries for the pension.

READ: AFP personnel with low pay nix contributions to pension fund 

JPV