Dominguez seeks resolution on MUP pension issue

The Department of Finance (DoF) hopes to resolve the problematic military and uniformed personnel (MUP) retirement and pension system before the present administration's term ends.

When asked if he sees a resolution before President Rodrigo Duterte's six-year term ends, Finance Secretary Carlos Dominguez 3rd told reporters, "I hope so." He was asked for his opinion after the Development Budget Coordination Committee (DBCC) identified the MUP pension scheme as one of the country's fiscal risks. Other downside risks to the country's fiscal position, according to the interagency body's Fiscal Risks 2022 report, include: changes in revenue allocation and expenditure devolution to local governments; prohibition on certain expenditures in line with the conduct of the 2022 national elections; and inability to reform the current pension scheme for MUP.

Nonetheless, the DBCC said Senate Bill 1419 and various House of Representatives bills on MUP retirement and pension reform, which are currently pending in their respective houses of Congress, seek to provide all MUP with adequate remuneration and benefits by revamping the current retirement benefits and pension scheme.

"The DBM's (Department of Budget and Management) position paper on the matter dated Aug. 14, 2020, recommends, among others, that the financial sustainability of the proposed contribution of the national government should be revisited," it underscored.

The committee underlined that the said contribution rates vary per bill, but commonly range from 18 to 27 percent of the MUP's monthly base pay, which is exorbitantly high when compared to the civilian rate of 12 percent of the monthly basic income.

It cautioned that this would lead to a significant increase in retirement and pension obligations in the coming years, with no corresponding financing sources to cover them.

"In fact, the creation of the retirement fund will necessarily result to an additional requirement of P45 billion annually, according to the actuarial study by the DoF," the DBCC continued.

It was also suggested that the MUP retirement funds be administered and overseen by a MUP Fund Authority, the body added. The Budget department has proposed that, rather than creating a MUP Fund Authority, the Government Service Insurance System (GSIS) be recruited to serve as fund administrator due to its actuarial, investment, and fund management knowledge and experience.

"It is also prudent to have it be managed by the GSIS so that administration of the retirement and pension systems are holistic and overseen by one central agency," the DBCC emphasized.

Source: TheManila Times