Department of National Defense chief wants RSBS abolished

MANILA, Philippines -- Defense Secretary Gilbert Teodoro is set to ask Congress to abolish the Retirement and Separation Benefits System (RSBS) of the Armed Forces of the Philippines (AFP).

He said they have already prepared a bill that would be endorsed to Congress to serve as basis for the abolition of RSBS and returning members’ contributions.

Teodoro pointed out that government would still have to shoulder the payment of retirement and separation benefits of soldiers because a new system that would replace RSBS has not been created.

He said the defense and military establishments are dealing with two issues surrounding the RSBS. One is its dissolution should be through a law because it was created through legislation.

And the other is whether the Government Service Insurance System (GSIS) would accept soldiers as members, considering their risk profile.

Beyond that, he said they would still have to come up with a replacement for the retirement system, where the government would have to provide seed capital to allow the system to operate for a number of years.

“Establishing a new pension plan for the armed forces is difficult to conceive and to envision, since there are several issues involved. For example, will the current members of the armed forces be paying for the future, because you can’t have retirement benefits until you load up the retirement fund and make it grow, and is the government willing to put in capital contribution again for that pension plan,” he said.

After the RSBS failed to serve its function of paying retirees, the government has been paying soldiers their benefits, which involves a substantial amount, from the General Appropriations Act.

“The RSBS was designed to ease the burden of government (on soldiers’ pensions). However, it had two major flaws. Number one, the initial seed capital was too small and number two, they did not copy the system in place with the SSS or the GSIS where if you are an employee, you get a salary deduction but the government or employer pays double the amount of your contribution to the system. In RSBS it was just solely a salary deduction from the soldier and no counterpart contribution,” he said.

The RSBS was established as a private entity in 1973, with P200 million in seed money to provide pension for soldiers. It deducts five percent of the monthly base pay of soldiers, which is supposed to be returned upon retirement with an additional six percent in interest.

Due to bad investments, the company has been forced to get the money for pensions, recently worth P10.6 billion annually, from the national budget.