AFP completes draft bill on pension reforms

MANILA, Philippines -  The military’s Retirement and Separation Benefits System (RSBS) has completed a draft bill that aims to reform the armed forces’ retirement scheme and to address the government’s growing pension arrears.

RSBS president Emilio Marayag said among the proposals of the draft bill is the scrapping of a provision in the retirement law that raises retirees’ pension every time the salaries of active soldiers are upgraded.

Marayag noted that the provision, part of a Marcos-era presidential decree, resulted in the ballooning of the government’s retirement obligations.

“Our pension (arrears) is growing. It is caused by a provision of PD 1638 or the retirement law. When the salary of active soldiers increases, the pension of retirees should also increase. We will remove that provision in our proposal,” Marayag said in an interview over the weekend.

Marayag said under the draft bill, the new retirement body to be formed would be given the authority to adjust pension rates.

“The board of trustees of the new (retirement) organization would be given the prerogative to make adjustments so the pension of retirees would not be indexed to the salaries of active soldiers,” he said.

Marayag said the draft bill has been endorsed by Armed Forces chief Gen. Eduardo Oban Jr., also the chairman of the RSBS board of trustees.

“We expect that in due time, this (proposal) would be considered by the authorities including Congress,” the RSBS official said.

Under the law, pensioners are entitled to an increase every time active soldiers receive salary upgrades. Officials have admitted that such setup is making it difficult for the government to settle the pension arrears.

Latest data from the Armed Forces Pension and Gratuity Management Center showed that the government has allotted some P24 billion for pension requirements this year. The government owes around P16 billion to about 112,000 military pensioners.

There are around 4,000 to 5,000 retirees every year. The government currently relies on savings to fund the pension arrears.

Earlier, the defense department called for the conduct of studies for a new retirement system amid concerns that the government may be spending too much for the pension of retired soldiers.

The study seeks to eventually relieve the national government from supporting military retirement benefits. The new system will replace RSBS, which was ordered deactivated in 2006.

The move came after Sen. Ralph Recto raised concerns about the possibility that more funds are being allotted for the benefits of retired soldiers than for the salaries of those in active service. 

The RSBS was formed in 1973 by the late President Ferdinand Marcos to serve as a funding scheme for the payment of retirement and separation benefits to military personnel.

The payments are funded by deductions from soldiers’ salary. The pension fund collected five percent of a soldier’s basic monthly pay and ensured a 6 percent return upon retirement plus pension benefits.

In October 2006, the AFP announced that RSBS was losing money since its funds were invested on low-return real estate projects and loans.

RSBS, which was intended to be self-sufficient, currently subsists solely on the contributions of its members.