The cost of financing the retirement benefits of the country’s military has gone up by 164 percent this year to more than P137 billion, from only P71 billion last year, based on data supplied by the Department of Finance (DOF).
That cost, the DOF and the Department of Budget and Management (DBM) said over the weekend, were to ramp up some more over eight years and already approximate the country’s annual budget for the entire defense department of more or less P188 billion.
That cost, the DOF said, has panicked fiscal planners, as the benefits escalate every year that a self-sufficient pension system is not in place to assume the role once played by the hopelessly corrupt and broken Armed Forces of the Philippines—Retirement and Separation Benefit System.
The DOF and the DBM are even now studying further a retirement fund for soldiers through the Government Service Insurance System (GSIS) and finishing it within the year, to address the increasing pension costs of soldiers serving the military.
According to Finance Secretary Carlos G. Dominguez III, the DOF and the DBM are addressing the necessity of a sustainable retirement system for military personnel. One proposal is to incorporate such an entity with the GSIS and do away with subsidies from the government.
“Yes, we are working closely together with the budget to make sure the uniformed personnel will have a retirement fund of their own. One of the ideas that were examined precisely, is to include them in the GSIS,” Dominguez told financial reporters.
The DOF targets to complete the proposed fusion with the GSIS within this year, adding this was a priority measure under President Duterte needing to go through legislation quickly.
“We certainly want to complete it within the year. It is a very important measure because you know this is really quite complex and it requires a lot of work with actuaries. And you know, usually those studies take time, quite a bit of time, because it is not only the current retirees but the future,” as well, he added.
In February budget Secretary Benjamin E. Diokno said addressing the cost of military pension through the annual budget was not sustainable. He also said the Legislative-Executive Development Advisory Council in January agreed to a review of the pension system for military personnel and policemen.
According to the Development Budget Coordination Committee, the budget for 2016 pension amounted to P71 billion, and that without reforms this will balloon to more than double in eight years to P187.9 billion.
“Under the current [system], according to Defense Secretary Delfin N. Lorenzana, the cost of the pension for the retirees will almost equal the budget of the operational side of the DND [Department of National Defense]. He mentioned it several months ago. That was what triggered the study,” Dominguez said.
To correct the deeply flawed pension system of military personnel, a seed fund equivalent to P5.57 trillion is required. Without so-called indexation and active personnel contribute to the seed fund, the cost was lower at only P2.03 trillion based on the latest actuarial study conducted by the GSIS.
Under the 2017 General Appropriations Act, President Duterte is seeking a total of P3.35 trillion, with the Philippine National Police allotted a budget of P110 billion and the DND with P137.2 billion.
The Bureau of the Treasury in a fiscal risk report released in 2016 blamed the challenges faced by the current pension system to “the features in the retirement laws of the uniformed services such as the automatic adjustment of a retiree’s pension based on the prevailing scale of base pay for similarly ranked active personnel and early entitlement to pension benefits even before a retiree attains the compulsory retirement age of 56”.
Under the current military pension system, uniformed personnel may receive three pensions upon retirement including a regular pension, another pension upon reaching 65 years as veterans of the service and a temporary administrative staff disability pension at the age of 80 years. While the GSIS has yet to issue a statement regarding the proposal, Dominguez said officials from the DND are amenable to the measure.
“Well certainly from the DND, I think they will welcome such a plan,” he added.
http://www.businessmirror.com.ph/military-pension-ramps-up-to-p137b/
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