Finance Secretary Benjamin Diokno has sounded the alarm on “unsustainable” pensions for our military and other uniformed personnel (MUP), warning of an imminent fiscal collapse if reforms are not initiated soon.
The MUP includes 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.
The ranks of retired and retiring MUP are actually not that large compared with those of the private Social Security System (SSS) and the Government Service Insurance System (GSIS) but the uniformed personnel’s pensions are funded from the government’s own internally generated revenues and borrowings, unlike the SSS and GSIS, where monthly contributions are deducted from their salaries and from their employers.
In the past few years, the government has had to borrow money to cover unfunded pension liabilities for the MUP. The borrowings are expected to increase in the years ahead, reaching P1 trillion by 2030, with interest payments alone reaching P39.6 billion.
Yet, according to the finance secretary’s figures, members of the MUP were receiving an average monthly pension of P40,049 as of 2022, compared to P4,528 for SSS and P13,600 for GSIS members.
Note that these are averages and are calculated based on the members’ last salaries while in service. Government workers, including the uniformed personnel, received large boosts in their salaries from 2018 onwards, boosting the pensions for those who retired after these adjusted salaries. President Rodrigo Duterte signed a specific law for the soldier and policemen in 2018, clearly to get their support as he launched his iron-fist regime. There are generous provisions such as retiring uniformed personnel being promoted one rank higher as a kind of goodbye gift. This bonus further increases the pension they will receive.
With the uniformed personnel, pensions are heavy responsibility for the government for several more reasons. First, the mandatory age for uniformed personnel is only 56, compared to 60 for Filipinos in the private sector and 65 for Filipino government employees.
Uniformed personnel can also retire as early as 20 years of government service, and, unlike the SSS and GSIS, they have a generous survivorship benefit system—the widow of a uniformed staff can claim 75 percent of the pension of their late spouse.
Diokno points out that a soldier recruited at the age of 20 can take optional retirement as early as the age of 40. Not only that, Diokno observes, military people live longer so that a 20-year-old military recruit who retires at 40 might very well receive a pension well into his 90s.
There have been attempts to reform the pension system for the uniformed personnel, including raising the age of retirement to 60 and reducing the survivorship benefits but nothing came out of those proposals.
Pensions—whether for uniformed forces or for civilians—are so important for Filipinos given that we have so few safety nets for retirees. During their working lifetime, salaries tend to be low and savings are negligible, and once they retire, they face many risks from con artists offering get-rich-quick scams. (I bristle, too, with legitimate banks and financial institutions and their “insurance” schemes that can, ironically, wipe out their emergency funds.)
Add on the many unemployed and underemployed relatives of retirees who find ways to control the ATM accounts where the pensioners get their monthly funds.
Globally, aging populations have meant many governments adjusting their pension schemes to delay retirement. China is looking into adjusting their retirement ages, the lowest in the world at 60 for men, 55 for white-collar women, and 50 for women factory workers.
The upward adjustments for the mandatory retirement age will exacerbate social tensions as people try to extend their working life, especially in the times we live in with global inflation.
Just look at France where the president, Emmanuel Macron, decided to ram through a new retirement age of 64, up from 62, and sparked nationwide riots. Note that the adjustment targets the year 2030, almost a decade away, but the government saw the need to make the transition this early.
Will we have the foresight to look for alternatives to improve our pension system for uniformed and nonuniformed personnel?
mtan@inquirer.com.ph