FINANCE Secretary Benjamin E. Diokno announced last Tuesday that President Ferdinand R. Marcos Jr. has approved decreasing the contributions of government to the pool of funds for the pension of military and uniformed personnel, among other reforms to avoid a “fiscal collapse.”
In a news conference in Malacañang, Diokno disclosed that Marcos decided to finally address the significant burden on government finances of pension to these state employees.
For this year alone, Diokno said the government will spend more than P120 billion (roughly $2.21 billion at current exchange rates) to fund the pension of those serving under several state institutions. The latter are: the Armed Forces of the Philippines; the Bureau of Jail Management and Penology; the Bureau of Fire Protection; the Philippine National Police; the Philippine Public Safety College; the Philippine Coast Guard; and, the Bureau of Corrections.
“It’s not sustainable. I said, if this goes on, there will be a fiscal collapse,” Diokno told reporters.
Currently, the pension funds of military and uniformed personnel, or “MUP,” are completely funded by the government, unlike those from other sectors.
Automatic indexation
ACCORDING to Diokno, the Department of Finance (DOF) proposed to Marcos to minimize government exposure in the pension of MUP.
One of the proposals includes mandating all those in active service and as well as new recruits to pay pension contributions gradually.
Diokno explained that for the first three years, their contribution is five percent of the salary while the contribution of the national government (NG) to the pension fund would be 16 percent. For the next three years, he added, this will be increased to seven percent and then the NG share will decline to 14 percent.
“And then, years thereafter, the MUP share will be increased to nine [percent], and then NG share to 12 [percent],” the Finance Secretary added.
Diokno added the DOF also wants to remove the automatic indexation of pension to the salary of active personnel of single ranks as well as delaying the release of pension from 56 years old to 57 years old.
The DOF chief said these proposals are being supported by Senior Undersecretary for Defense Carlito G. Galvez Jr. and Interior Secretary Benjamin D. Abalos Jr.
Similar proposals were already discussed during the term of the late President Benigno C. Aquino III and former President Rodrigo R. Duterte. However, both administrations decided not to act on said proposals.
Political capital
ACCORDING to Diokno, Marcos will be using his considerable “political capital” to implement the measures.
“Remember that he’s, I think, the first president who was elected by a significant majority: 60 percent [of the total votes]. The other presidents, they were only elected by 25 percent [of the votes] because of the number of candidates,” the DOF chief explained.
“So he really has this very strong support and he’s willing to spend his political capital for this because he saw that if this is not implemented, there will be a fiscal collapse in the future,” Diokno added.
The Finance Secretary said that the President will also make use of his “strong control of both Houses of Congress” to secure the necessary legislation to implement the said reform.
“This [set of measures] was approved by the President; we are already talking to some people in Congress to push [for] this,” Diokno said.
