Finance Usec. Alu Tiuseco | The Source - video Dailymotion

CNN Philippines

The Defense secretary and retirees raise concerns over the Military and Uniformed Personnel or MUP pension reform bill that was revised at the House committee level as the Finance chief insists on removing the indexation from the MUP pension system.  Finance Undersecretary Alu Tiuseco tells us more in the show.  Visit our website for more #NewsYouCanTrust: https://www.cnnphilippines.com/  Follow our social media pages:  • Facebook: https://www.facebook.com/CNNPhilippines • Instagram: https://www.instagram.com/cnnphilippines/ • Twitter: https://twitter.com/cnnphilippines

Transcript

00:00 You're watching The Source on CNN Philippines. I'm Pinky Webb. The country's finance chief

00:08 standing firm to remove the indexation from the military and uniformed personnel pension

00:14 system for both those in active duty and new entrants. Finance Secretary Benjamin Dokno

00:20 explains the removal of indexation from the current system. That's a non-negotiable pillar

00:26 of what he calls a genuine pension reform. MUP's pensions are indexed to the current

00:32 salary of incumbent personnel of the same rank. Hence, their benefits automatically

00:39 increase at regular intervals. He says allowing this to continue will be unsustainable and

00:45 may further expand the budget deficit. But no less than Defense Secretary Guilbo Teodoro

00:51 opposes the proposal. Let's go straight to the source of the story. We have finance under

00:56 Secretary Alute Yuseco. Yusec Yuseco, welcome to The Source. Thank you so much for your

01:01 time. Good morning, Pinky. Good morning to the listeners of The Source. Hello from the

01:07 Department of Finance. Yeah. So members of the Department of Finance, I think together

01:11 with the GSIS and other representatives went around. I believe Luzon Visayas and Mindanao

01:18 talked to members of the police force and our soldiers to talk about this MUP pension

01:26 fund. What was just the general consensus when you had all those meetings with them?

01:33 If I may just clarify, so for the information of everyone, the term military and uniform

01:41 personnel encapsulates seven services. So it's the Armed Forces of the Philippines,

01:49 the Philippine National Police, the Bucor, BJMP, a certain unit of NAMREA, and we have

01:55 the Bureau of Fire Protection. So for three months, starting May, we went around the country

02:01 trying to consult, have a dialogue with the concerned sectors and services, trying to

02:07 make them understand what the reform is all about. And the good news is that we changed

02:14 our proposal because of the feedback from our brothers and sisters from the AFP and

02:21 uniformed services. And the feedback is really that our friends from MUPs are very gracious.

02:30 They are willing to listen, willing to make some sacrifices, to share the burden with

02:37 the government. Of course, they have the asks. And so I'm happy to report that the product

02:43 of these roadshows, we did over 30 dialogues and consultations, is that we have a win-win

02:52 solution, number one of which is that some of the aspects will remain. So I just want

03:00 to clarify that there will be no diminution in the benefits of the pension. It will remain

03:07 as the highest pension system, most generous pension system in the country, same average,

03:16 same computation. The survivorship benefits will remain after 20 years of service. MUP

03:24 members may still opt to optionally retire and start receiving their pension. You won't

03:31 see that in the civil service pension system or the SSS, the private, as well as this is

03:41 a big thing. So there will be a no-touch policy for those who are already receiving their

03:47 pension. So those who are retired will continue to benefit from full taxation as well as,

03:56 of course, definitely they will not be subjected to the contribution.

04:00 You said let's talk about that one by one. Let's talk about it first so that we're clear.

04:06 The proposal, let's start with this, is that for the new hires or the new entrants to begin

04:15 contributing 9%. And then those who are active personnel will also be contributing 9%, but

04:29 it's on a staggered basis. It starts at 5%, and then after a couple of years, I believe

04:34 it becomes 7%, and then 9%. So at least we're clear on that, that it's 9% for new entrants

04:41 and 9% staggered basis for those in active service.

04:46 Yes, and if I may, that's fully accurate. That's a recognition of the fact that those

04:56 in active service may have other liabilities already, just like they took out some loans.

05:05 And so we won't give them time to adjust. But the good news about that is that recognizing

05:11 this fact, we are introducing loan restructurings and other adjustments in the payment scheme.

05:18 So it might, you know, installment basis or we will adjust.

05:24 But if I may just backtrack a little, I want to impart to our listeners the whole problem

05:32 of the MUP and we start with a non-contributory system. The main problem with the pension

05:40 system of the MUP is that number one, it's not non-contributory. As opposed to GSIF and

05:47 FSS, our brothers and sisters in the MUP system does not contribute.

05:55 They don't contribute. They don't contribute to their salaries for the pension fund. They

06:02 give nothing.

06:05 The problem with that is that it's fully funded by the government. So it's competing with

06:13 other liabilities that the government is spending. What does that mean? What's happening is that

06:21 since it's not sourced, sometimes we have to borrow money to source it. And in fact,

06:31 in 2020, we already have arrears in the neighborhood of 34 billion for the payment of pension.

06:40 And what happens is that our pension is delayed. So what we're proposing is that we ask our

06:50 friends, brothers and sisters from MUP to do forced savings. We want to clarify this

06:59 is not an exaction. This is not a tax. This is really for you. We save now so that the

07:06 government can save with you. And when your pension comes or you retire, you will receive

07:15 your pension. So it's really a secure and reliable pension system.

07:23 That's very clear. It's also good that you highlighted that because maybe some are not

07:30 really familiar that the MUP, the military uniformed personnel, don't really contribute

07:37 to this pension fund. This is solely coming from the government. But I want to stop you

07:44 there because I want to talk about this first because you talked about 2020 and there were

07:48 arrears of about 34 billion for the pension fund alone.

07:54 Yusek, since this was brought up, I mean, especially now, this year or maybe even last

08:02 year by Secretary Diocno, ever since, they really don't have a contribution here. And

08:11 I know what you're saying that please look at this as forced savings so you have something

08:18 when you retire. What happened that somehow is making this fund unsustainable? Wasn't

08:25 there any foresight on the number of our members of everything, AFP, PNP, Bureau of Fire Protection,

08:35 AFP, etc. that looked into maybe in so many years, it's not sustainable? What happened?

08:44 Yes, in fact, it's not sustainable. So we're really pushed to the wall because according

08:51 to our computation, if we do not make any refunds now, our unfunded liabilities will

08:58 be down to 14 trillion. It's more than... Can you repeat that Yusek? I lost some parts.

09:08 If we do not do any refunds right now, if it's status quo, our unfunded liabilities

09:15 could reach 14 trillion. By when?

09:20 It is now. That's an actuarial studies. Based on our actuarial studies, that's our unfunded

09:27 liabilities. That includes liabilities for future retirement or pension from those who

09:35 are in active service. That's an actuarial study.

09:38 So you mean you're already counting those who are actually set to retire. So how do

09:44 you say that to understand? How do you say that? It needs 14 trillion now? Is that right?

09:54 Yes. Not today, but if we count even those who are in active service now, in year two,

10:07 year three of their service, when they reach retirement on the 20th, that will be our liability.

10:15 That's moving. But in actual numbers, our pension that we need to pay by next year is

10:25 140 billion. To put it in perspective, Pinky, we are paying a higher pension than our MOOE

10:39 and our capital outlay or our expenses for daily or modernization. Since 2018, our pension

10:51 liabilities are higher. For example, our pension is 160, our budget is only 116 for capital

11:02 outlay. So we really have a problem now because we're spending more on pension than on the

11:15 needs of those who are in active service. This is like the expenses for our boots, for

11:22 our cars. The needs of the MUPs. There's still a lot to discuss, but we need to take a break.

11:30 This is The Source on CNN Philippines. Please stay tuned.

11:38 You're watching The Source on CNN Philippines. I'm Pinky Webb. Our source today, finance

11:41 undersecretary Alut Yusek. So many numbers here, Yusek. So I'll go back because they

11:48 were asking, just to clarify this 14 trillion that you're talking about. My understanding

11:53 is that what you're saying is given the number of military and uniformed personnel we have

12:00 today right now, and looking forward into how much they will be needing, the retirees,

12:07 the retireables, and who will about to retire, even now, they're only there for a year. This

12:13 is the kind of budget that will be needed to pay them. Is that correct?

12:21 That's true. This is really a new number because we just finished the actual study for the

12:28 updated data. That number, the 10 trillion, is if we assume that their salary will be

12:36 increased by 10%. But if we say that there's just a 5% salary increase in the neighborhood

12:45 of 4 trillion, that's a lot. Still, it's in the trillion pesos. Our unfunded liabilities

12:53 now are between 4 trillion to 15 trillion. It really depends on the increase of salary.

13:00 What is a normal increase in salary? Is that year on year?

13:05 That's the thing, Pinky. We need more time to discuss this, but really that's a problem

13:17 for indexation.

13:18 Okay. Let's talk about that. Let's also bring this in to have our viewers get a sense. Right

13:24 now, the proposal is 9% for new entrants and those in active, those active personnel. Now,

13:34 the GBO, one of his first tasks was really to fix the MUP pension fund. My understanding

13:43 is he wants full indexation for retired and retireables, yung magri-retiro. I read somewhere,

13:52 you said, to which Congressman Salcedo was saying that this is acceptable. First, ano

13:58 ba 'tong indexation so we better understand it?

14:01 All right. The indexation is that as a general rule, when you retire, your salary for, well,

14:11 in the case of GSIS, your pension would depend on the average of your salary for the last

14:17 three years of service. But for MUPs, your pension is automatically adjusted to the salary

14:26 of those who are in active service. So what does that mean? For every increase in the

14:32 salary of those in the active service, automatically the pension will also increase. Same rate,

14:40 same multiplier. So what happens?

14:42 So that means that if I am a retiree, the person, every year, the person who is on the

14:51 same level as mine, who is in active service, tama-hu ba, who continues to get an increase,

14:58 that will be mirrored to me. I will be sharing that same kind of increase with that person.

15:04 I don't end with how much I actually made. I'm going to end up making as much as my counterpart,

15:12 that same level in the military uniform personnel. Yun po yung indexation.

15:19 And it's so peculiar because as opposed to the civil servants, which requires us to have

15:26 a pensionable age, meaning after 15 years of service, I can retire, but I can only receive

15:33 pension when I'm 60. For MUPs, they have the option to retire after 20 years of service

15:40 and then start receiving pension already. What does that mean? If you enter MUP at 20

15:46 years old, you can retire at 40 and start receiving. And then you retire, your actual

15:55 rank is colonel, but because of, there's another aspect, a one rank higher aspect, then you

16:02 will be receiving the salary of a general, which will be added. But that's a wrong example

16:14 because you won't be general after 20 years of service. But in the 20 years, for every

16:24 adjustment of your patrolman's salary. Yeah, yeah, yeah, I get it. But Yusek, there has

16:32 to, paano ho ba 'to? What is the middle ground? Because if Secretary Giocno is saying no way

16:40 to full indexation, di ho ba, that is his stand. And then Secretary Guibo wants full

16:49 indexation of, but I have to be clear, retired and retireables, ibig ho ba sabihin ito yung

16:56 mga retired na ngayon at yung magre-retiro until kailan po? Or is there a period by which

17:06 yung n-retireables? Alright, I just want to clarify on two things. We will not be removing

17:20 entirely the auto. What we will be removing is for the people who are going to retire,

17:28 full indexation. Yusek, sorry, I think you're, there's something wrong with the audio. I

17:37 don't know if you're using a laptop, but there are parts that I don't get to hear. Please

17:42 repeat. Please continue. What we are proposing is the removal of a full indexation for those

17:53 who are going to retire. What does that mean? There will still be an adjustment of 1.5%

18:04 increase in pension depending on the realities of price increase as well as the fiscal situation

18:13 or economic conditions of the country. So what we're trying to do is unbundle the payment

18:21 for active service and then for those who are retired because we recognize that we have

18:26 different needs. We have to respond to different needs. So what does that mean? If we unbundle

18:33 it, the government will have a fiscal space to increase the salaries of those who are

18:39 in active service, address their needs like probably increase in medical provision, housing

18:49 as well as schooling. But at the same time, the pension of those who are already retired

18:57 would still be increased. So we just want to clarify that. We will still be providing

19:09 for their needs. All right. We've run out of time, but this needs further discussion.

19:17 Absolutely, ma'am. So anyway, this is still in the works. There's still some talk about

19:22 this. We'll have you again. Finance Undersecretary Alou Tioseco. Thank you for your time. Thank

19:31 you for joining us here on The Source. I'm Pinky Webb. You're watching CNN Philippines.

19:35 [END]

19:41 (explosion)

Finance Usec. Alu Tiuseco | The Source

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