‘Taking over military pension very prohibitive’

From the original estimate of P7 trillion, the cost of taking over the military pension system by the Government Service Insurance System (GSIS) has gone up to as high as P9 trillion, according to latest numbers crunching by the Department of Budget and Management (DBM).

But as stratospheric as that number might be, neither the DBM nor the GSIS has the slightest idea for now on how to craft a military pension system that is self-sustaining and not taken out of the pockets of taxpayers.

Budget Secretary Benjamin E. Diokno on Thursday bared optimism that such a mechanism hopefully could be crafted by midyear, when government planners finally come up with a plan addressing the ballooning pension cost of military personnel.

“Maybe around midyear. But we still don’t know the modality yet,” Diokno told financial reporters at the sidelines of an infrastructure forum on Thursday.

The budget chief added that should the GSIS take on the challenge of managing the pension system of the Armed Forces, the government would have to infuse funds to the agency to make the deal more attractive.

“We are still studying several options but a combination, probably using GSIS as the base. But if we want to convince the GSIS to take on the challenge, we have to give something,” he said.

Just last year budget officials and the Department of Finance (DOF) began addressing the necessity of a sustainable retirement system for military personnel. One proposal was to incorporate such an entity with the GSIS and do away with subsidies from the government.

In February last year Diokno categorically said addressing the cost of military pension through the annual budget was not sustainable. He also said the Legislative-Executive Development Advisory Council last January agreed to a review of the pension system for military personnel and policemen.

To correct the deeply flawed pension system of military personnel, budget officials said a seed fund equivalent to P5.57 trillion is required. Without so-called indexation and active personnel contributions to the seed fund, the cost was lower at only P2.03 trillion, based on the latest actuarial study conducted by the GSIS.

Without a self-sustaining military pension system, the cost of extending pension benefits to the uniformed services will have to be taken out of the annual budget of the military. Such a cost had been estimated at 50 percent to 60 percent of their annual budget.

Extending subsidy to the military is also very expensive for taxpayers, as the cost amounts to some P90 billion a year.

The GSIS has thus far refused to take on the challenge of providing pension benefits to those who bled for the country and have willingly put themselves in harm’s way so that the rest of us can live in peace.

The GSIS has said it will help craft a pension system that is not funded by taxpayers’ money.

Home Business Banking & Finance ‘Taking over military pension very prohibitive’

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