About 70 to 80 percent of enlisted personnel eligible for optional retirement are considering exiting the military service before a new law for men in the uniform pension system will be enacted, Defense chief Carlito Galvez Jr. said Monday.
During a Senate inquiry, Galvez said these soldiers, who have already rendered at least 20 years in service, are seeking optional retirement due to the “apprehensions” brought about by the proposed reform on the Military and Uniformed Personnel pension.
“We anticipated that around 70 to 80 percent of our enlisted personnel — eligible for optional retirement — will retire. Because they want to apply the current pension system as they are affected by the apprehension of the possible new pension system under the MUP law,” the DND chief stressed.
Galvez said both Department of National Defense and the Armed Forces of the Philippines recognized the financial implication of the pension program for men in uniform personnel.
“While we fully support the legislative measures, the current issues hounding the pension system — it created already some sort of apprehensions. The DND and AFP respectfully appeal that the morale and soldiers will be given weight in this deliberation, considering the notions of modernizing our pension system,” he said.
Galvez said there’s a need to come up with a “common ground” in terms of changing policies on the MUP pension system.
Middle ground
“So, if it is possible, we would want to appeal to our lawmakers that we should really look into the possible middle ground that we can really see that the morale of our people will be taken care of,” he said.
He added that the defense sector “unanimously agreed” for the new entrants to provide contributions on their future pensions as recommended by the economic team.
The soldiers, however, opposed the recommendation to reduce the active personnel’s lump sum from 36 months to 18 months, Galvez said, noting that “there are some adverse reactions” when this suggestion was raised.
“We urged for thorough discussions so that we can hear all the sentiments of the people. We recommended to our personnel not to avail of the optional instead work until they reach compulsory retirement,” he said.
“If this is still financially impossible, we will be amenable and open to the modifications of the system so long as these are fair and equitable to the military and all the MUP,” he added.
Galvez said the defense sector moves for “financial soundness or actuarial science” on pension reform.
“But if you think furthermore, you cannot stop the bleeding. Am I right? So, need to plan more to stop the bleeding. One of the proposals is to let the active personnel contribute,” Estrada said.
Meanwhile, Senator Christopher Lawrence “Bong” Go sees other ways to address the ballooning fiscal crisis “without the expense of the military and all uniformed personnel.”
“With all due respect, can we look for another funding option instead of moving what the active service personnel are receiving and obliged them to pay mandatory contributions or reduced their pension,” he said.
Go said the government should instead focus on fixing the country’s taxation and eliminating corruption which he described as “enough to cover for the pension requirement.”
“We can also impose higher taxes on luxury goods or increase SIN Tax. With this, we can also protect the health of our people,” he added.
Citing the AFP records, Galvez said 2,643 soldiers reached compulsory retirement while 14,325 military officers availed of the optional retirement from 2018 to 2022.
In the first quarter of 2023, Galvez said the number of active soldiers who want to avail of optional retirement is now at 917.
The Philippine National Police likewise recorded at least 65 percent of their overall personnel are also considering optional retirement due to the MUP pension reform.
“We are hemorrhaging with our senior officers because they already wanted to go out of the service to avail of the old pension program,”
Based on the PNP record, about 12,000 policemen out of the total of 18,000 retirees from 2018 to 2022 have availed of the optional retirement.
The PNP said the figure “most probably” correlates with the proposed pension law. Only 1,000 recruits are entering the police service annually.
Dela Rosa then said: “It’s very revealing that this impending passage of this new law that we are proposing right now – is already resulting “brain-drain as far as the MUP is concerned.”
During the Senate hearing, Finance Undersecretary for Fiscal Policy and Monitoring Group Ma. Cielo Magno said without reforms in the current pension system, pension spending is projected to “increase tremendously” up to P1.5 trillion by 2040.
Magno said the effects of borrowing for pension liabilities “cascade to succeeding years and are sensitive to higher interest rates.”
By 2030, she said, additional interest expense for the system would balloon to P40 billion and P171 billion by 2040.