Diokno: Marcos agrees to change military pension

Treasury Secretary Benjamin E. Diokno announced last Tuesday that President Ferdinand R. Marcos Jr. approved cuts in government contributions to the military and military pension fund, among other reforms to avoid a “fiscal collapse”.

At a press conference in Malacañanga, Diokno revealed that Marcos had finally decided to place a significant burden of public finances on these civil servants in the form of pensions.

This year alone, Diokno said the government will spend more than 120 billion pesos (about $2.21 billion at current exchange rates) to provide pensions for those who work in several public institutions. The latter include: Armed Forces of the Philippines; Bureau of Prison Administration and Penology; Fire Bureau; Philippine National Police; Philippine College of Public Safety; Philippine Coast Guard; and the Bureau of Corrections.

“This is not sustainable. I said that if this continues, there will be a fiscal collapse,” Diokno told reporters.

At present, the military and military pension funds, or “MUP”, are wholly funded by the state, unlike the pension funds of other sectors.

Automatic indexing

BY DICKNO, the Department of the Treasury (DOF) proposed to Marcos that he minimize the government impact on MUP’s pension.

One of the proposals includes requiring all those on active duty, as well as new recruits, to pay pension contributions gradually.

Diokno explained that for the first three years, their contribution is five percent of wages, while the national government’s (NG) contribution to the pension fund will be 16 percent. He added that over the next three years this figure will be increased to seven percent, and then the share of NGs will decrease to 14 percent.

“And then, years later, the share of MUP will be increased to nine [percent]and then NG divide by 12 [percent]” added the Minister of Finance.

Diokno added that the Ministry of Finance also wants to cancel the automatic indexation of pensions to the salaries of one-time personnel, as well as defer the payment of pensions from 56 to 57 years.

The head of the DOF said the proposals are backed by Senior Deputy Secretary of Defense Carlito G. Gálvez Jr. and Secretary of the Interior Benjamin D. Abalos, Jr.

Similar proposals were already discussed during the administration of the late President Benigno C. Aquino III and former President Rodrigo R. Duterte. However, both administrations decided not to act on these proposals.

Political Capital

According to Diokno, Marcos will use his considerable “political capital” to implement the measures.

“Remember that he is, I think, the first president who was elected by a large majority: 60 percent [of the total votes]. The rest of the presidents were elected by only 25 percent [of the votes] because of the number of candidates,” explained the head of the DOP.

“Therefore, he has really very strong support and he is ready to spend his political capital on this, because he saw that if this is not implemented, there will be a financial collapse in the future,” Diokno added.

The Treasury Secretary said the president will also use his “strong control of both houses of Congress” to ensure that the necessary legislation is passed to implement said reform.

“This [set of measures] approved by the President; we are already talking to some people in Congress to push [for] this,” Diokno said.