Hearing of the Senate Defense Committee on MUP Concerns
February 2, 2021
February 2, 2021 - Opening Statement: This is a continuation of our previous public hearing held last October 5, 2020, on the MUP pension bills referred to this committee, which was suspended with the commitment that an actuarial study would be conducted by the Government Service Insurance System (GSIS) together with our key stakeholders, such as the Bureau of Treasury and the MUPs, among others.
Just to refresh our memory, last year and this year’s appropriations reflect the veracity of this serious financial concern, given the steep increase in the MUPs’ pension funding from P80 billion in 2020 to P120 billion under the 2021 General Appropriations Act.
Among the many proposals from the Department of Finance is the cancellation of automatic indexation. In this regard, we may have to request for a legal opinion from the Department of Justice on whether or not Congress can diminish or reduce the benefits already being received by existing pensioners, as well as those who are already in the service.
Last week, 25 January 2021, our office received the actuarial study of the GSIS on the updated results of funding requirements of the existing retirement scheme of the MUP, as of 31 December 2019.
The numbers from the updated study tell us that the daunting scenario that the estimated seed fund needed for the proposed pension system is about P9.6 trillion. In order to fund said seed fund, the study suggests that Congress needs to appropriate more than P800 billion annually, for twenty (20) years, if no changes or reforms are made on the pension system.
The yet-to-be-completed actuarial study has also taken into consideration the one-time infusion of the proceeds from the total sales of the MUP assets, which at present is pegged at P14.98 billion, with a note that other MUP services have not submitted the appraised or assessed value of their assets.
To date, only the PNP, BJMP, Philippine Coast Guard, including the AFP, have submitted the list of their assets.
Now to give us a clearer picture, we have also invited a representative from the Bureau of Internal Revenue to provide at least the zonal valuations of the various properties.
Moving on, the GSIS actuarial study used 27% as the mandatory contributions, of which 18% would come from the government share, while the other 9% is from the MUP’s personal share. This figure resulted in a reduction of 5.94% in the total pension requirements.
By examining the summary of results of the sensitivity scenarios and after excluding the no or limited indexation scenarios, it appears that there are two (2) other schemes that will result in a substantial reduction of the estimated total funding requirements: (a) mandating a minimum pensionable age of 56 years of age; and (b) pegging the salary increase to only 5% per year rather than 10%.
Now these are among the points of discourse that we wish to center on in today’s joint public hearing.