Palace vows to set up better military pension fund

Malacañang yesterday assured that the government would set up a better pension fund for retired military personnel after President Arroyo ordered the deactivation of the Armed Forces of the Philippines Retirement and Separation Benefits System (AFP-RSBS) by yearend after years of mismanagement and financial difficulties.

Executive Secretary Eduardo Ermita said Executive Order 590, issued by Mrs. Arroyo earlier this month directs the transfer of the AFP-RSBS assets in trust to a government financial institution while a new pension fund is set up.

"We will do our best to make the next system transparent and more stable. We may be looking at another GSIS-type of system," Ermita told The STAR, referring to the Government Service Insurance System.

Mrs. Arroyo directed the Department of National Defense (DND) to prepare a draft legislation to set up a new retirement fund that will have strict guidelines and cover new entrants to the military service.

Ermita assured military retirees that their contributions would be returned to them with interest.

The AFP-RSBS was established in 1973 under Presidential Decree 361 to provide a funding scheme for the payment of retirement and separation benefits for military personnel.

Under the law, the AFP-RSBS should be able to allow its funds to grow through investments and other means so it will be self-sufficient.

In 1998, the Senate Blue Ribbon Committee recommended the creation of a new AFP-RSBS charter that will provide transparency and strict investment guidelines.

"The RSBS story is scarred by sordid sellouts and dubious deals," the Senate said. "Thus it will surely go down in history as an institution that was run either by the most sophisticated swindlers or by the most naive and willing swindling victims in the country. So naïve that they allowed the most blatantly injurious ventures to be funded by the system. And so willing that they could actually be thieving co-conspirators of those who had drained the system’s resources to the edge of collapse."

The Feliciano Commission Report in 2003, which investigated the Oakwood mutiny, said the AFP-RSBS was "fundamentally-flawed" and was unable to discharge its mandate.

The commission recommended that the AFP-RSBS be liquidated and that the soldiers’ contributions be returned to them with interest.

A financial advisory report by the KPMG Laya Mananghaya & Co. noted the inappropriateness of the AFP-RSBS investment portfolio, which consists mainly of risky and non-liquid assets.