MUP pension system is a ticking time bomb

I dread to see how this ticking fiscal time bomb will explode and possibly leave all of us affected by the blast.

This is the so-called pension system of the military and other uniformed personnel (MUP), which continues to require a hefty amount of the government’s budget, shouldered entirely by taxpayers.

Long overdue reforms through pending bills are far from moving and are just gathering dust in Congress.

I am not against providing pension to our MUP. Not at all. I am well aware that many of them risk their lives in the service of our country and like every worker – public or private – they should be accorded benefits, including pension.

But the system needs to be reformed so that it would be sustainable. This is also to enable succeeding generations of MUP to receive their pension.

To put it simply, if the system, at its current state, leads to a fiscal collapse, there may come a time that there will be no pension anymore for our uniformed personnel. And that for sure would be a bigger disservice to our servicemen.

The STAR last week reported that the government will have to increase the sector’s budget by 50 percent to a whopping P217 billion next year from just P144.72 billion this year.

This is based on the emerging 2026 National Expenditure Program, as reported by The STAR’s public finance reporter Maureen Simeon in an exclusive report.

To be exact, the proposed allocation for the Pension and Gratuity Fund is at P216.54 billion.

“The annual fund is meant to pay MUPs’ pension and retirement gratuity and terminal leave benefits, including separation benefits and incentives. Given that the MUP pension system reform has yet to become a law, it remains included in the record P6.793-trillion budget for 2026.”

As of now, our military and other uniformed personnel continue to enjoy the benefits of a pension system even without any contribution into the fund. And this is what makes it unsustainable.

Averting a fiscal collapse

Against this backdrop and amid rising global tensions, Trump’s tariffs, the need to borrow and our growing spending needs, the Philippines may soon find itself in a fragile fiscal position, with the MUP pension system – long considered as unsustainable by many observers – among the aggravating factors.

The MUP refers to the military personnel of the Armed Forces of the Philippines and the uniformed personnel of the Philippine National Police, Bureau of Fire Protection, Bureau of Jail Management and Penology, Bureau of Corrections, Philippine Coast Guard and National Mapping and Resource Information Authority. The separate and slightly different MUP retirement schemes for each agency are collectively referred to as the MUP pension system. It is a defined-benefit scheme with a lump-sum payment upon retirement and monthly pensions indexed on the current wages of active MUP, according to an October 2024 report by the Senate Economic Planning Office.

In 2022, according to the Senate think tank, there were 470,073 active MUP, composed mostly of police officers under the PNP (47.49 percent) and military personnel under the AFP (34.45 percent). BuCor and NAMRIA have the smallest shares of MUP at 1.49 percent and 0.06 percent, respectively.

Furthermore, it said that during the same year, there were 174,500 regular MUP pensioners, indicating that for every 100 active MUP, there were 37 regular pensioners.

The average age of MUP in 2019 was 35, with an average length of service of 10 years. Monthly compensation averaged P39,687 while pensioners received an average monthly pension of P43,475 during the said period.

It’s no surprise that based on the 2022 Global Pension Index, the Philippines is ranked as the second worst pension system in the world.

Note that it’s not only the MUP pension system that is facing critical issues. Other public pension programs such as the SSS are also facing issues related to adequacy, equity, efficiency and sustainability.

And because moves to reform the system remain pending, the cost to fund the MUP pension will continue to escalate and it’s entirely funded by taxpayers.

Against this backdrop, the mandatory contribution on the part of the MUP, therefore, should be required.

I write this to ensure that our uniformed personnel’s retirement benefits and pension scheme are secure, reliable and sustainable.

This is the best way to reward them – to make sure that their pension system does not collapse.

The Senate think tank proposes that new entrants and active personnel can be required to contribute the following shares of their base pay: (1) five percent for the first three years upon effectivity of the reform, (2) seven percent for the next three years and (3) nine percent every year after that.

It also said:

The national government can contribute amounts based on the base pay of MUP: (1) 16 percent for the first three years, (2) 14 percent for the next three years and (3) 12 percent every year after that. Other policy options may require personal counterparts only from new entrants and propose higher rates for government contributions: 18 percent for new entrants and 22 or 27 percent for active personnel.

Whichever reform will be undertaken, it must be in consultation with our MUP. Ensuring the pension’s sustainability, after all, should be a shared responsibility.

One thing is certain – real reform is long overdue and it’s time to defuse this ticking time bomb.

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Email: [email protected]. Follow her on X  @eyesgonzales. Column archives at EyesWideOpen on FB.