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Monday, January 27, 2020
Home Opinion Op-Ed Columns Congress needs to fix govt pension system

Congress needs to fix govt pension system



DO you know that for every peso spent on the salary of an active military personnel, the government is paying another 60 centavos as pension for a retired soldier? That means the annual military spending for three servicemen only really produces two active soldiers.

Let’s do the numbers. Of the Department of National Defense’s (DND) proposed budget of P258 billion for Calendar Year 2020, more than a quarter (or P69.7 billion) is allotted for pensions and gratuity funds for retirees of the Armed Forces of the Philippines (AFP) and war veterans. Taking out the amount earmarked for the pension fund, that leaves the DND with around P188.6 billion in regular funds.

Of the P188.6 billion, P119.12 billion, or about 63 percent of the regular fund, was earmarked for personnel services to cover the pay of 148,668 uniformed personnel, 69,938 Citizen Armed Force Geographical Unit members and 12,400 civilian employees. The P69.7 billion allocated for the pension fund is equivalent to around 60 percent (or 60 centavos of every peso) of the P119.12-billion budget for active service personnel.

Lest I be misunderstood, I’m not against giving retired soldiers and war veterans the benefits that are rightfully due them. It is our country’s legal and moral obligation to do so. They have lived or died in the service of our country, defending the freedoms that we cherish and enjoy as Filipino citizens. With limited employment opportunities, or disabled by disease or age, most of our retired soldiers and veterans rely solely on their retirement benefits and pension to sustain their daily needs.

My point, however, is that depending on the annual budget appropriation to fund the growing pension fund requirements for military personnel is neither prudent nor sustainable in the long term. With the pension fund disbursement and personnel services expenses taking up the bulk of the national defense budget that leaves very little for the modernization of our armed forces.

In order to have a credible defense posture in the region, the country needs to increase defense spending to at least 2 percent of the country’s gross domestic product (GDP). According to the Stockholm International Peace Research Institute’s Military Expenditure Database, the Philippines spends only 1.1 percent of its GDP on its armed forces. If defense expenditure is to be at least 2 percent of the country’s GDP, the regular defense budget should be around P320 billion, or almost twice the current P188.6 billion regular defense allocation.

But that’s not likely to happen unless the government can find a way to control the rising cost of servicing retirement and pensions costs, which saw a meteoric 24 percent rise from 2019. Even the Department of Budget and Management admits there is a “huge” problem posed by the “ballooning pension” of military and uniformed personnel. If we don’t fix this problem soon, we will be allocating more for pensions than the salary of those in the active service.

There is a plan to overhaul the pension system through the Military and Uniformed Personnel pension reform bill, which will set the compulsory retirement age at 60, instead of the current 56. The retiree must also have had 20 years of satisfactory active service to be entitled to a pension. This bill needs to be certified as urgent by Malacañang if it is to put the bloating payouts to armed forces and police retirees under control.

Another option that ought to be explored is to place the management of the retirement and pension fund for military and uniformed personnel under an independent agency controlled by the national government, similar to the Government System and Insurance System (GSIS), but without the controversies. What is clear though is that President Duterte cannot let military officials again take charge of any pension fund for the military and police personnel.

We don’t want a repeat of the Armed Forces’ Retirement and Separation Benefits System (RSBS), which, to the mind of ordinary soldiers, served as a tool for some crooked officers to dip their fingers into the trust fund and enrich themselves.

Established in 1973, RSBS took over from the GSIS the payment of the retirement and separation benefits of soldiers, with the mandate to make the pension fund self-reliant. It never attained such financial autonomy despite decades of operation due to its flawed business model, aggravated by management blunders. Due to alleged anomalies and mismanagement, RSBS was finally abolished in April 2016 by the BS Aquino 3rd administration. Even after its abolition, the Commission on Audit continues to flag “serious inaccuracies in the accounting of funds and real estate properties” by the defunct RSBS.

But it’s not only in the military and uniformed personnel that funding for retirement benefits and pensions that’s an issue.

Congress has the propensity of enacting laws that give lavish pensions to retired government officials from certain agencies, claiming that such pension fosters the autonomy and independence of these officials. The law usually provides that when certain government officials who have rendered a certain number of years of service retire, “he or she shall receive during the duration of his or her natural life, retirement benefits equivalent to his or her last salary plus representation and other allowances.”

The problem with these laws, however, is that they not only inflate the country’s annual budget for retirement and pension benefits, they also only favor a select group of people. Why not give the same benefits to rank-and-file government workers who need it more?

Congress should stop giving out these “golden parachutes” to government officials upon their retirement. It diverts government funds from projects that ought to benefit the many instead of a privileged few. Worse, it makes our inadequate government pension system even more flawed.

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Today’s Front Page January 27, 2020

Today’s Front Page January 27, 2020