GSIS backs new pension scheme for military,  other uniformed personnel

The state-run Government Service Insurance System (GSIS) has committed to oversee the proposed new pension system for military and uniformed personnel, as long as it receives fresh funds that cannot be commingled with the current fund it manages.

Also, GSIS president and general manager Wick Veloso on Friday said the Marcos administration’s plan to “rightsize” the bureaucracy would affect GSIS’ collections.

“Once rightsizing becomes a law, the GSIS will implement it. It will be harder for us because there would be less contributions ( if rightsizing results in a smaller number of government workers), Veloso explained.

“But if the government deems that rightsizing is the right thing to do to better run the bureaucracy, we will abide by it,” Veloso said.

Under the rightsizing plan, the GSIS will be tasked to provide affected government personnel their retirement and separation benefits, including unemployment benefits.

President Marcos was pushing for rightsizing as expenditures on personnel services to hire and pay government workers account for over one-fourth of the annual national budget.

Budget Secretary Amenah Pangandaman last month said that rightsizing meant not only downsizing offices and positions that were redundant or unnecessary due to digitalization, but also upsizing for the Marcos administration’s priority sectors.

Meanwhile, Veloso said that even as legislation aimed at establishing an improved pension system for military and uniformed personnel were needed to be refiled in the 19th Congress, the GSIS was willing to take the role of an external manager of financial assets for investment purposes.

Veloso said the proposed military and uniformed personnel pension system will entail capital infusion into the GSIS because it could not touch the pension fund for its existing two million members and 550,000 pensioners.

According to the GSIS, “a separate and independent entity must administer and manage military and uniformed personnel’s pension and benefits… [but] if the GSIS will be the fund manager and benefit administrator, the entire pension system (without any exemption), including the administration of [their] benefits and management of the trust fund, should be under the GSIS.”

Also, the GSIS “should not be held accountable for the financial sustainability or actuarial risk and administration of the benefits and pension scheme of military and uniformed personnel.”

The GSIS also wanted no commingling of military and uniformed personnel funds with those it currently administers; the new system should be contributory in nature, especially among new entrants; and it would not advance funds to the trust fund committee from GSIS-administered funds.

The current pension system covering the military, police, firemen and other uniformed personnel had been identified as a fiscal risk. Pension payments grew at an average 12.3 percent yearly from 2010 to 2019, such that the military and uniformed services sector spent more on pension than capital outlays as well as maintenance and other operating expenses (MOOE).

This was due to the automatic indexation of pension — retirees enjoyed the same increase in benefit each year as that in salaries of active personnel. The pay of active military and uniformed personnel rose by an average of 19.6 percent yearly from 2008 to 2019, estimates of the Cabinet-level Development Budget Coordination Committee (DBCC) had shown.

“Without funding sources to support this growing expenditure, the military and uniformed personnel pension system, as well as the fiscal stability of the national government, is at serious risk. The ability of the government to compensate active personnel and invest resources to keep military and uniformed personnel in fighting shape is also in jeopardy,” the DBCC warned last year.

Military and uniformed personnel’s unfunded liabilities soared to P9.6 trillion in 2019 from only P5 trillion in 2016, the latest actuarial studies undertaken by the Bureau of the Treasury (BTr) and the GSIS had shown. Unfunded liabilities referred to the amount anticipated as future payouts for active personnel as well as current pensioners.

If unaddressed, GSIS estimates had shown the current pension scheme will cost the government P850 billion yearly in the next two decades.

At present, the national government shoulders the pension benefits of retired military, police and other uniformed officers through the annual national budget.