Senate Hearing on Establishing a Mechanism for the Pensions of MUPs

Sen. Lacson’s Opening Statement at the Hearing:

The Chair welcomes everyone present in the joint public hearing of the Joint Committee to discuss several proposed measures that seek to rationalize and establish reforms in order to create a fair, sustainable and clear mechanism for the pensions of MUP and other related matters.

Distinguished colleagues who are present this morning, and guests convened today physically and virtually to find the need to address critical concerns which if not managed immediately would mean dire consequences in the financial welfare of our country. I speak of the ballooning pension requirements of our MUP which we fear may no longer be sustained by our scarce government resources in the coming years.

Certainly, it is high time we created a standalone special fund so that we may deter the inevitable fiscal disaster of draining the public coffers attributed to the bloating pension requirements of our uniformed retirees which up to this very moment completely rely on the national budget.

The numbers don’t lie and they boggle the mind. The actual total releases for the MUP pensions under the 2019 GAA for MUP pensions amounted to P107.2B while for this year, the adjusted appropriated amount is P80B. As proposed under the 2021 NEP, Congress is expected to approve P135.8B to fund the pensions of the MUP.

Before Joint Resolution 1 came into being, the MUP pension requirements were at 11 figures: P74B in 2017 and P76B in 2018. Be that as it may, we remain committed to fulfill our civic obligations to our men and women in uniform. After all, no less than the Constitution provides that the State shall from time to time review to upgrade the pensions and other benefits due to retirees of both the government and the private sector.

But a tough question remains: how do we hit the right balance as we carry out our constitutional mandate to provide adequate remuneration and benefits to our MUP while also ensuring that we have sufficient funds to manage our resource and financial obligations?

In order to facilitate today’s discussion, I wish to focus first on the key features of the proposed measures at hand by shedding light on the following matters:

One proposal is to utilize proceeds derived from interests and sound investment earnings from a corpus fund collected from the sale of government assets and properties, or lease or joint development with the private sector.

Hence we need answers to some questions:

First, what viable assets of the MUP Services and the government in general can be used to establish the seed fund for this purpose; and

Second, how much can be generated to establish the pension fund which as estimated by our economic managers, would run up to almost P6 trillion?

Another proposal as an augmentation to the first proposal, what would be the feasible weight of mandatory contributions from the active members of the MUP in order to sustain our funding need? How much would be the corresponding yearly share of the government in said mandatory contributions if any?

Concomitantly, since the compulsory retirement age will be an important factor in the continuity and viability of the fund, should it be maintained at the current 56 years of age, or should it be raised to 60 or even 65? If so, what are the fiscal implications? What is the potential impact on the future pension requirement should the scrapping of indexation become a reality?

What pension system should the government adopt in order to achieve financial standing that is sound and sustainable? And ultimately, what would be the total financial burden to the government should this new system be adopted?

Lastly, lest we forget, the highlights and the material issues discussed during the sub-committee hearing of Sen. Richard Gordon in reference to SBN 1785 pertinent to the proposal prescribing fixed terms for the Chief of Staff and other key officers of the AFP, increase in the mandatory age of retirement of military personnel, and provision of a more effective attrition system, should be made part of the records of this joint committee hearing. A motion in this regard is in order at the proper time.

Having said all that, doing the math and some simulations and correctly is the key to arriving at the most viable and acceptable solution to this very complicated problem that we as legislators and policy makers are facing.

Before we proceed, allow me to acknowledge the presence of Sen Marcos and minority leader Sen Franklin Drilon and Sen Koko Pimentel who are virtually present. And may I ask the committee secretary to likewise acknowledge the presence and to welcome our guest resource persons.