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Economic managers back military pension reform

GOVERNMENT economic managers backed a proposal to reform the pension system for the military and police to prevent its collapse and ease fiscal burden.

In a statement, the Development Budget Coordination Committee (DBCC) said reforms would ensure a better framework for the pension system that could ease the pressure on state funds amid a coronavirus pandemic.

“Without funding sources to support this growing expenditure, the military and uniformed personnel pension system, as well as the fiscal stability of the National Government, is at serious risk,” it said.

“The ability of the government to compensate active personnel and invest resources to keep [them] in fighting shape is also in jeopardy,” it added.

The interagency body composed of the Department of Finance, Department of Budget and Management, Bangko Sentral ng Pilipinas and the National Economic and Development Authority said keeping the so-called automatic indexation of pensions to salaries of uniformed personnel is unsustainable.

Indexation aligns a retiree’s benefits to wage increases for active workers.

The DBCC said salaries of the military and police increased at an average of 19.63% from 2008 to 2019. The government has suspended the indexation pending are review by lawmakers and the Executive branch.

Despite the increase, soldiers and policemen are not subject to the mandatory contributions deducted from the monthly salaries of government employees. Their pensions are provided for in the national budget.

A study by the Government Service Insurance System showed that the government needs to allot P9.6 trillion to keep the pension system afloat without reforms.

“We urge Congress to pass a fiscally sustainable version of the military and uniformed personnel pension reform when the session resumes,” the DBCC said.

House Bill 9271 authored by Albay Rep. Jose Maria Clemente S. Salceda seeks to reform the system by creating a more sustainable framework for separation, retirement and pension for retired soldiers and policemen. The bill has been pending at a House of Representatives committee level.

“Sourcing the funds for a noncontributory pension system from the budget means curtailment of other equally pressing demands of public welfare including those for food, medicine, infrastructure and even digital transformation,” former central bank Deputy Governor Diwa C. Guinigundo said a BusinessWorld column in May. — Luz Wendy T. Noble

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