House approves MUP pension reform bill

MANILA, Philippines — The House of Representatives approved on third and final reading yesterday a consolidated bill providing for a pension system deemed financially draining by some quarters for military and other uniformed personnel (MUP).

With 272 votes against four negative and one abstention, the chamber gave its nod to House Bill (HB) No. 8969 creating a “sustainable fiscal framework” for the pension system for MUP.

The measure also provides mechanisms for the disposition of some government assets to generate funds for the MUP pension.

Speaker Martin Romualdez, a principal author of the bill, said the measure also provides for a “guaranteed” three percent annual salary increase for MUP for the first 10 years from the time the proposed law takes effect.

But he underscored that HB 8969 – to be known as “Military and Uniformed Personnel Pension System Act” – will rationalize the system of granting monthly pension and other benefits to MUPs “in a way that is fair to them and the national government.”

“This landmark legislation demonstrates our unwavering commitment to the men and women in uniform, who risk their lives daily to maintain peace and order,” he said.

Romualdez noted HB 8969 provides for “a robust, sustainable and fair pension system that recognizes their invaluable service to our nation.”

“With this reform, we’re not only prioritizing the well-being of our MUP but also ensuring the country’s economic stability. It is a testament to our commitment to national security and fiscal responsibility,” he added

The Speaker congratulated the ad hoc committee, headed by committee on ways and means chair Joey Salceda, and other lawmakers for “their hard work and dedication towards this pressing issue.”

Under the bill, active MUPs are not mandated to contribute to their pension while new entrants will have to contribute nine percent of their base pay as their “personal share while government will shoulder 12 percent.”

P934 billion cost

But during plenary debates on the bill, Salceda admitted that it would cost the government some P934 billion to finance the pension of MUPs for 35 years or until 2058.

This is because the Trust Fund to be created for the pension system would only be “self-sustaining” by 2058.

Salceda pointed out that they came up with this estimate by assuming new entrants will begin working at 22 years old and retire at the age of 57.

But he said MUP agencies are “already very happy” with the reforms in their pension system.

In a statement, Salceda noted the reforms instituted in the proposed legislation would “significantly improve our fiscal position.”

The measure also makes the fiscal risks of the MUP pension system “very predictable.”

“We satisfied the three guarantees we gave in exchange for the sacrifice MUPs were willing to make for the reform: Guaranteed salary increase, guaranteed pension increase and guaranteed funding sources,” he added.

“As I said, this is a social compact, between MUP agencies, the taxpayers as represented by the economic team and the people at large – brokered by Speaker Martin Romualdez on the President’s instruction,” he said.

Other provisions

The proposed law sets the mandatory retirement age at 57 years, or upon accumulation of 30 years of active service, or whichever comes later. MUPs may voluntarily retire after 20 years of service.

For key officers, retirement is upon completion of tour of duty or upon relief by the President.

For new entrants, or those who entered or re-entered the service after the enactment of the proposed MUP pension law, retirement pay will be 50 percent of their base pay plus longevity pay in case of 20 years of service, increasing by 2.5 percent for every year of service beyond 20 years to a maximum of 90 percent for 36 years of service and over.

The pension of retired MUP and survivorship pension of qualified survivors shall be automatically indexed at a rate not exceeding 100 percent of the increase in the base pay of active MUP holding the same rank during the same year.

The measure also creates two MUP trust funds, one for the Armed Forces of the Philippines and another for uniformed personnel services.

Kabataan party-list Rep. Raoul Manuel voted “no” to HB 8969, underscoring that only around 25 House members were physically present at the session hall during the voting.

Manuel also questioned the three percent annual pay hike of MUPs for the first 10 years after the bill’s enactment, citing the dismal salaries of teachers.

“In exempting active MUPs from contributing to the pension funds, it will become too burdensome for the government before the trust fund becomes self-sustaining. This is why this representation votes NO to House Bill 8969,” he maintained.

Not sustainable

Albay Rep. Edcel Lagman said he also voted no to House Bill No. 8969, saying it “will not be sustainable in the long run.”

“Only countries with super economies like the United States, Great Britain and Canada, all G7 countries and China, the second largest economy in the world today, have MUP pension systems fully subsidized by the State,” he pointed out. The Philippines “is not in the league of these countries,” he added.

“Even G7 countries like France and Italy impose contribution from MUP in their pension plans,” he stressed.

The lawmaker also said that “upper middle income countries like Malaysia and Thailand, and our fellow lower middle income countries like Indonesia and Vietnam, which have even better economies than the Philippines, impose mandatory contributions from the prospective pensioners in their respective military and uniformed personnel.”

He underscored that even during the martial law regime when MUPs had “ascendancy,” the military and uniformed personnel were required to contribute to their respective pension plans.

For Lagman, it is “not a valid reason” to exempt MUP members from contribution because they could die in line of duty.

He maintained that more employees in the civilian service and the private sector also die of work-related causes.