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Publication Detail
PB2021-01: Promoting Sustainability through Reform in the Pension System for Military and Uniformed Personnel

The current Military and Uniformed Personnel Separation, Retirement, and Pension System has long exerted considerable strain on the National Government’s (NG) finances and has been the subject of reform proposals. The issue can be summed up in two points. The first is the direct-funding mechanism where the NG appropriates significant amounts in the annual budget due to the absence of a contributions-based scheme. The second point refers to generous features, particularly the indexation policy that automatically adjusts pensioners’ benefits to the base pay of their counterparts in active service, resulting in both fiscal and equity issues among government personnel. Recent government estimates revealed that without reform, the NG will need about P800 billion annually in the next 20 years. To address the situation, several house bills proposing for the establishment of a contributions-based system and the abolition of the indexation policy, among others, have been filed. This paper discusses (a) key features of related measures and (b) presents equity and budgetary implications of proposed reforms. Under the proposed Executive-supported bill, the NG can see a significant drop in projected budgetary requirements due to the creation of a contributions-based system and declining directly-appropriated amounts for pension benefits of existing retirees.

Congressional Policy and Budget Research Department
Authors Keywords
Estrada, Miguel Antonio, G.; Gonzales, Arsenia, S, ; Fiscal Sustainability; military and uniformed personnel; pension reform; pension equity; retirement;
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