Sponsorship Speech on Senate Bill No. 2501 Committee Report No. 173: Military and Uniformed Personnel Separation, Retirement and Pension System Act


Senate Bill No. 2501 under Committee Report No. 173

“Military and Uniformed Personnel Separation, Retirement and Pension System Act”

Sponsor: Senator Jinggoy Ejercito Estrada 

Mr. President, esteemed colleagues, ladies and gentlemen, as your Chairperson of the Senate Committee on National Defense and Security, Peace, Unification and Reconciliation, I am honored to submit to this august chamber and sponsor Senate Bill No. 2501 under Committee Report No. 173 providing a New Separation, Retirement and Pension System for the Military and the Uniformed Personnel.

This measure is a consolidation of Senate Bills 284 filed by this representation, Senate Bill 1421 filed by Sen. Ramon Bong Revilla, Jr., Senate Bill 2434 authored by Sen. Imee Marcos, Senate Bill 2446 authored by Sen. Win Gatchalian, and taking into consideration House Bill 8969, which was passed on Third Reading by our colleagues in the House of Representatives last September 25, 2023. 

This measure is included in the legislative agenda under the Philippine Development Plan for 2023 to 2028. This bill is also one of the priority measures identified by the Legislative Executive Development Advisory Council or the LEDAC for the 19th Congress. In fact, the move to rationalize the pension and retirement schemes of all uniformed personnel and veterans have been included in the LEDAC’s Common Legislative Agenda as early as 13thCongress (that is during 2004-2007). 

Mr. President, I sincerely hope that the 19th Congress will finally address this pressing concern affecting not only the fiscal position of the country, but also the stability in the defense establishment and the uniformed services, as persistent talks of reforming the pension system stir trepidation and uneasiness among their ranks. 

According to an actuarial study conducted by the Government Service Insurance System (GSIS), the military and uniformed personnel’s (MUP) pension system’s unfunded liabilities could range from P4.45 trillion to P14.32 trillion, depending on the amount of salary increase if the current system remains in place.

Under the 2023 General Appropriations Act, more than 128.656 billion pesos is appropriated for MUP Pension, and another 10.857 billion is appropriated for veterans’ pension. Our economic managers from the Department of Finance, with the Bureau of the Treasury and the Department of Budget and Management, say that this number is expected to significantly increase over the years. 

To illustrate, the total MUP pension appropriations for this year alone is almost equivalent to this year’s appropriations for the personnel services of the AFP at P136.239 billion and bigger than the total appropriations for the maintenance and other operating expenses or MOOE and capital outlay for all seven MUP agencies (i.e. the AFP, PNP, PCG, BJMP, BFP, BUCOR, NAMRIA) combined which is P127.59 billion. 

Over the past 5 years, the MOOE and Capital Outlay for MUP grew around 9% annually, while pension liabilities grew more than double the rate at 19% every year. 

This representation humbly submits before this august chamber the product of exhaustive dialogues and consultations, most specially with the stakeholders. I would like to place on record the efforts of the economic team – DOF, with the Treasury, DBM and GSIS – to reach out to all MUP agencies and listen to their concerns. Consultations were conducted from May to July of this year to personally hear the sentiment of our soldiers, policemen, men and women in uniform on the proposed reforms to their pension system. My Office sent representatives to these roadshows and at one point, the group visited 4 cities in 2 days. They visited the unified commands in Cebu and Davao during the first day, and Zamboanga and Palawan on the second day. The Committee likewise conducted TWG meetings and held one-on-one meetings with the stakeholders. 

At naging napakalaking tulong ang mga pag-uusap na ito dahil nabigyan ng mukha at boses ang mga numero at datos na kinu-kwenta o tinutuos ng ating economic team. Hindi lang po ito basta usapin ng pera at gastos, naipaloob din dito ang aspeto ng sakripisyo at kabayanihan ng ating mga kawal at unipormadong kawani, gayundin ang kanilang mahalagang papel na ginagampanan sa pagpapanatili ng kapayapaan at kaayusan na siyang susi ng pag-unlad ng ating bansa. 

Mr. President, my dear colleagues, I am pleased to present this piece of legislation that balances the interests of our economic managers with respect to tight fiscal limitations, and honors the constitutional mandate of our military and recognizes the peculiar nature of work of our uniformed personnel whose lives are always at great risk. 

First and foremost, any reforms to the prevailing pension scheme will only be limited to new entrants. This has been the overwhelming consensus amongst the stakeholders. This means that whatever is being enjoyed by the current pensioners, and whatever is expected by those currently in the active service will still be enjoyed and received by them – in fact for some of them, the retirement pay will be higher by 5 percentage points. 

Hindi po gagalawin, hindi po babaguhin, at hindi po papakialaman ng isinusulong nating panukalang batas ang pensyon ng mga pensyonadong retirado. Andyan pa rin ang tinatawag na automatic indexation. Wala rin pong magiging pagbaba sa inaasahang pensyon ng kasalukuyang mga nasa serbisyo. Kung ano po ang inaasahan ninyong matanggap mula noong kayo ay pumasok sa serbisyo, iyon po ang inyong matatanggap. Malinaw po iyan.

Meanwhile, the new entrants will be covered by a more sustainable pension regime – one that is assured of adequate funds for the retirement of our military and uniformed personnel, at the time when they need it the most – one that is not dependent on the government’s limited capacity to set aside funds therefor, but one that is wholly owned by the contributing members, and one that is self-sufficient for the welfare and varied needs of the retired MUPs in the future. 

Separate trust funds will be created for the military and for the uniformed personnel, which shall be managed by the GSIS and overseen by the respective military and uniformed services through trust fund committees. The establishment of these trust funds will free upsome fiscal space which can be reallocated for the sector’s equally important priorities, like the modernization program of our military and other law enforcement agencies, or further expanding the health, education and housing programs for the MUP and their dependents. As our economic managers would like to call it – this will be “an investment on peace and security.”

Under this proposed measure, retirement pay will be pegged to a maximum of 90% of the base pay and longevity pay for all MUP from the current 75% and 85%. While there will be no automatic indexation, there can be annual adjustments in pension depending on the fiscal or economic conditions of the country. 

Paano po tayo makakasiguro na hindi ito matutulad sa nabulilyasong RSBS or Retirement and Separation Benefits System noon? At paano masisiguro na masusustentuhan ang pensyon ng ating MUPs sa hinaharap? 

Una, may kontribusyon na ang new entrants. Sa ilalim ng ating panukala, 7% ng base pay at longevity pay ng military personnel, samantalang 9% naman para sa uniformed services. Ito po ay may katapat ding kontribusyon mula sa national government na 14% at 12%. Kung matatandaan, sa RSBS ay wala pong naging katumbas na government contribution na isa sa dahilan ng pagiging underfunded nito. 

Pangalawa, kung sa RSBS maaaring i-refund ang contribution na may kasamang interes, sa ilalim ng ating panukala, hindi na makukuha ang contribution ngunit makakatanggap ng separation pay ang mga aalis sa serbisyo. 

Pangatlo, magkakaroon ng oversight committee na mamamahala sa trust fund, kung saan kasali ang Finance Secretary at GSIS, gayundin ang MUP agencies na mabibigyan ng boses sa pangangasiwa at pagpapalago ng pondo. Inaasahan din natin ang expertise at mahabang karanasan ng GSIS sa fund management, gaya ng kanilang matagumpay na pagpapalago sa pension fund ng mga civilian employees. 

The Feliciano Commission which looked into the AFP-RSBS and established that the previous pension scheme for the military was, to quote, “fundamentally flawed” and they recommended that “the new pension plan should be contributory on the part of the soldiers.”

If I may also echo the reminder of our economic managers that contributions to their pension are not tax impositions on income but should be considered as “forced savings”. Ito po ay isinasantabi at pinalalago ng pamahalaan para mapakinabangan ng ating mga magigiting na sundalo, pulis at uniformed personnel sa oras ng kanilang pagre-retiro. Let me also share that the US Department of Defense recently adopted a new retirement system which includes defined contribution rates from service members’ monthly basic pay. 

Mr. President, dear colleagues, I respectfully ask your support to this measure. We cannot continue kicking the can down the road, and further avoid or delay the issue of ballooning expenditures in MUP pension. I humbly request the collective wisdom of this august chamber in taking on and finally addressing this, if I may say, controversial and sensitive issue, that has been cast aside, postponed, if not evaded, many times during the past Congresses, and had languished in the legislative mill. 

I trust that this Senate, under the leadership of our Senate President Juan Miguel Zubiri, has the political will and firm resolve to squarely face and settle this once and for all. While your Committee on National Defense has exhaustively studied and reached out to all concerned to come up with this substitute measure, this representation as your Defense Committee Chairperson, humbly submits to the collective wisdom and guidance of this body, as I always have been. 

Thank you, Mr. President. Thank you, dear colleagues.