The Department of Finance (DoF) said the government targets to complete this year a study that will determine if integrating the military’s pension system with the state-run Government Service Insurance System (GSIS) is feasible.
“We will finish the study, maybe by the end of the year. And then we will present that, obviously, first to the Cabinet. And then if required, which I think is required, it has to be legislated,” Finance Secretary Carlos Dominguez 3rd told reporters in an interview.
At present, he said, the Finance department is gathering essential data from the Armed Forces of the Philippines (AFP) to determine the total number of military pensioners.
“We are looking at it. I just wrote letters to get an updated list of the pensioners, because the latest list we have is from 2010. So I don’t want to give you any numbers, because there must have been a lot more pensioners coming in,” Dominguez said.
The pension of soldiers and policemen are sourced from the national budget, which the Department of Budget and Management said is not sustainable.
This year, the Department of National Defense got a budget appropriation of P137.2 billion.
In a fiscal risk statement for 2017, the Bureau of the Treasury noted that the ballooning uniformed personnel pension cost continues to be a source of fiscal risk.
The problem of the pension system can be attributed to the “features” in the retirement laws of the uniformed services, such as the automatic adjustment of a retiree’s pension, according to the report.
Its assessment hinges on the prevailing scale of base pay for similarly ranked active personnel and early entitlement of pension benefits even before a retiree reaches the compulsory retirement age of 56.
Last year, the pension budget amounted to P71.0 billion.
It is expected to reach P187.9 billion in eight years.
“In view of the foregoing, reform must be effected for a more sustainable pension system,” the report said.
A Technical Working Group composed of the Departments of Defense, of Budget and Management, of Finance, and of Interior and Local Government and the GSIS recommended establishing a seed fund that could generate sufficient interest revenue to cover the pension requirements of all uniformed services.
According to the latest actuarial study conducted by GSIS, if no reforms are introduced to the existing pension system, the seed fund would amount to P5.57 trillion in order to continue operating as pension fund for government employees.
However, if reforms are implemented, specifically the deletion of the automatic indexation feature, the formulation of a mandatory contribution and the designation of a minimum pensionable age, the amount required for the seed fund would only be P2.03 trillion, it added.