An October 10, 2011 press release from the Department of Budget and Management

Budget and Management Secretary Florencio B. Abad today warned that a crisis looms in the military pension system, as budgetary requirements for pensions are projected to overtake those for active personnel by 2016.

To resolve the issue, Abad said that the Department of Budget and Management (DBM) has collaborated with the Government Service Insurance System (GSIS) to conduct an actuarial study and device a system that will provide safeguards on the contributions of the members, sound financial basis for computing deductions, and ensure the sustainability of the military retirement system.

“We have to resolve this looming problem in the pension of our uniformed personnel decisively at the soonest time possible. It is very likely that in the next five years, the government will allocate more funds for the pension requirements of retired military personnel than the salaries of those still active in service,” Abad said.

“Pension benefit requirements of the military—under the Armed Forces of the Philippines and the Philippine Veterans Affairs Office—would amount to P67.0 billion by 2016. This will overtake the projected personal services requirements for active staff that amounts to P63.7 billion,” he said.

He said the current system—wherein government shoulders the benefits given to retired military personnel—is unsustainable, as he agreed with the recent statement of Retirement and Separation Benefits System President Emilio Marayag that one key problem that needs to be addressed is the growing amount of pension arrears. Abad also agreed with Marayag’s analysis that the indexation of retirement benefits to the salaries of active personnel has been a key cause of the problem.

Abad also warned that the magnitude of pension benefit requirements of military, police and other uniformed personnel is projected to increase by more than 100% to a total of P111 billion in 2016, from the proposed budget level of P52 billion for 2012.

While the result of the actuarial study has yet to be released, Abad proposed several administrative remedies to address the looming pension crisis such as: a) AFP-GHQ must desist from paying pension arrearages since no amount was appropriated for the purpose, b) PVAO must set a prescriptive period on the receipt of applications and processing of claims of new veterans, and c) review and update list of pensioners to eliminate the so-called “ghost” pensioners.

At present, the government shoulders multiple pension packages for the military and other uniformed personnel (see table 2). Unlike other civil servants, military and uniformed personnel do not contribute premiums to a pension fund. Also, soldiers and policemen retire at the age of 56, whereas civilian personnel start to retire at age 65.

Table 1:  Computation on Pension Requirements of Uniformed Personnel

(Amount in Thousand Pesos)

Particulars

2013

2014

2015

2016

No.

Amount

No.

Amount

No.

Amount

No.

Amount

AFP

 128,218

 33,516,567

 132,722

 38,974,257

 137,384

 45,320,652

 142,210

  52,700,467

PVAO

 260,981

 12,075,494

 260,563

 13,118,433

 260,145

 14,251,448

 259,728

  15,482,320

PNP

   66,646

 20,587,327

   74,164

 24,828,675

   82,530

 29,943,815

   91,839

  36,112,762

BFP

     4,726

   1,444,948

    5,865

   2,036,036

    7,277

   2,868,920

     9,031

    4,042,515

BJMP

     4,559

   1,150,618

    5,613

   1,530,313

    6,911

   2,035,306

     8,509

    2,706,941

Total

465,130

68,774,954

 478,927

80,487,714

494,247

94,420,141

 511,317

111,045,005

                                                        Table2:  Multiple Military Pension Packages

Pension

Age

Legal Basis

Computation

3 Years Lump Sum Benefit

56

PD 1638

1 month base pay & longevity of the next grade higher than the permanent grade last held, multiplied by 36 months

Regular Monthly Pension

59

PD 1638

1 month base pay & longevity of the next grade higher than the permanent grade last held, automatically adjusted based on existing salary rates in active duty

Old Age Pension

65

RA 7696

as amended

P5,000/month

Total Administrative Disability Pension

70

RA 7696

as amended

P1,700/month +  P500/month for spouse and for each minor child

Survivorship Benefit (PVAO)

Death

RA 7696

as amended

P1,000/month for surviving spouse and for each minor

Survivorship Benefit (AFP)

Death

PD 1638

50-70% of regular pension

Educational Benefits

Death

P18,000/semester per college student

Burial Assistance

Death

P1,000 granted to the next kin of a deceased veteran

Regular Disability Benefit

Disability

Ranging from P500 to P1,700/month, depending on disability

Assumptions: Computation is based in average growth rate from 2006 to 2013. The generated 16.28% growth in amount was thereafter applied to the 2014-2016 period.

 

 

 
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