The House ad hoc Committee on the Military and Uniformed Personnel (MUP) on Wednesday approved the substitute bill overhauling the MUP pension system to make it more fiscally sustainable.
Committee Chairman and Albay Rep. Joey Salceda said the substitute bill is still subject to style and further amendments, adding his panel will meet anew to approve the committee report of the measure on June 16.
Salceda stressed the importance of the passage of the bill as the current MUP pension scheme has accumulated unfunded liabilities amounting to P9.6 trillion or 53.4 percent of the 2020 GDP.
Salceda said that the pension system has a P9.6 trillion unfunded reserve deficit, primarily because uniformed personnel do not have a contribution system and that MUP pensions are much higher than that of civilian personnel.
Emphasizing the need to enact military pension reform, Salceda compared the MUP pension liability with other fiscal risks the country encountered in the past.
He said debts assumed by the Bangko Sentral ng Pilipinas from the Marcos administration was P413.45 billion or 25.3 percent of 1993 nominal GDP. Meanwhile, debts of the power sector were P1.24 trillion or 31.8 percent of 2001 nominal GDP. The MUP pension liability is pegged at P9.6 trillion or 53.4 percent of 2020 nominal GDP.
“Long-run growth will be hampered as government liabilities become fiscally unsustainable. This will result in the contraction of the economy by as much as -7.2 percent in 2030, significantly worse that the growth impact of the 2008 financial crisis of -2 percent,” said Salceda, citing the magnitude of fiscal threat of the MUP pension crisis.
“Public debt will increase by as much as 25 percent in 2030, around 4.5 times larger that 5.5-percent increase in 2004,” he added.
For her part, Marikina Rep. Stella Luz Quimbo described the P9.6 trillion liability as “unrealistic.”
“The P9.6 trillion present value of liabilities is for 10-percent increase annually. Based on my computation, it’s only P3.6 trillion because may sensitivity din na kinonsidera na 5 percent,” Quimbo said.
“Historically, the salary increase was only 10 percent every 6 years. Historically, the 10-percent increase was not annual,” she added.
But citing the Department of Budget and Management, Salceda defended his numbers, saying his data were thoroughly studied.
Moroever, key features of the committee report include the removal of automatic indexation but retention of the no-contribution scheme, pension increases based on a cost-of-living adjustment, rationalizing pensionable age at 56 years old, allowing optional retirement after 20 years in service, higher risk insurance coverage for those wounded or killed in action, and the creation of a military and uniformed services trust fund with leeway to initiate a credible defense posture.
Key revisions from the previous committee hearings include the addition of disability benefits in the authorized insurance system on top of already legislated benefits, and the creation of a provident fund to be infused with voluntary contributions from MUPs.
Salceda pushed for added disability benefits under the risk insurance system to be created in response to the suggestion of Iloilo Rep. Raul Tupas to enhance the benefits package for MUPs who incur disabilities in the line of duty.
“The benefits that MUPs will receive from the insurance system we will create under the Trust Fund Committee will be on top of whatever benefits they are already entitled to. So, this is a way to balance our fiscal reform of the system with the unique risks the MUPs take,” Salceda said.
According to Salceda, the House will approve its version before the hearings on 2022 national budget in August.