Duterte hopes to reform AFP pensions by 2022

PRESIDENT Rodrigo R. Duterte wants to fast-track the establishment of a new pension scheme for military personnel and have it set up before he steps down from office.

Finance Secretary Carlos G. Dominguez III said that economic managers, together with officials of the Defense, Interior and Local Government, and Transportation departments met with Mr. Duterte last week to present the blueprint for the new pension fund for the military.

“We laid out to them the problem and the way to solve the problem. But we have to sit down together to work out the mechanism for solving this problem — which will involve turning over some of the real estate assets of the organizations to be able to set up a fund for the retirement which we are recommending be managed by the GSIS (Government Service Insurance System) separately from the current (pension fund),” Mr. Dominguez told reporters.

“The President asked us to move forward quickly and we have to make another presentation to him on the progress by the end of August,” he said.

The new fund as drawn up will continue the full benefits granted to current pensioners, while those currently in the service will be eventually required to pay monthly contributions to the pension fund, similar to the system for civilians, while new service members will be placed under a new pension regime.

“We hope not to leave the next administration with this problem because the last admin[istration] left us with this problem with no plan. At least we have a plan,” Mr. Dominguez said.

Budget Secretary Benjamin E. Diokno has said that the problem began during the Ramos administration, but no one since then has addressed it. He called the imbalance between the benefits due and the pension’s resources the “elephant in the room.”

Currently, military retirees’ monthly benefits are funded solely by government budget allocations, which take up two-thirds of the Department of National Defense’s budget, a share which is expected to grow further.

The monthly payouts to pensioners are indexed to the salaries of those in active service, which means that benefits will grow alongside increases in military salaries.

“It’s not sustainable over the long run. It’s already taking a toll because you cannot get it out of your budget. So far it’s affordable but pretty soon it won’t be affordable. So we are just anticipating a large problem,” he said.

The economic managers earlier targeted a new pension fund set up by 2019, which they said would cost P7 to P9 trillion. —