By Benjamin Cuaresma
MANILA, Philippines — The government is set to spend nearly three times more on military and uniformed personnel (MUP) pensions than on the entire Armed Forces of the Philippines (AFP) modernization program next year, underscoring the mounting fiscal pressure to overhaul the country’s long-delayed pension system.
The Marcos administration has proposed P142.95 billion for MUP pensions in 2027, up 6.8 percent from the P133.91 billion appropriated for 2026 under the General Appropriations Act.
The proposed pension allocation is almost three times the P50 billion earmarked for the entire Revised AFP Modernization Program.
Former finance undersecretary Cielo Magno said the widening gap highlights the growing cost of leaving the pension system unchanged.
“The fiscal burden will continue to grow,” Magno told The STAR, warning that funds absorbed by pensions are resources that could otherwise be directed toward military modernization, territorial defense and other essential government services.
“We should compensate our soldiers and uniformed personnel fairly, but we must also confront the trade-off,” she said.
Magno said the government can no longer afford to repeatedly defer structural reforms to the MUP pension system as pension obligations continue to rise.
She pointed out that MUP salaries were substantially increased during the Duterte administration from 2018 to 2019, followed by further increases under President Marcos.
Under Executive Order 107, issued in December 2025, the government also revised the MUP base pay schedule and increased their subsistence allowance. The salary adjustments are being implemented in three tranches beginning in 2026, with succeeding increases scheduled for 2027 and 2028.
But higher salaries also mean higher pension liabilities.
“Every salary adjustment creates not only a higher compensation expenditure today, but a larger pension obligation for taxpayers for years to come,” Magno said.
“Despite repeated warnings about this problem, structural pension reform has been repeatedly deferred. That is fiscally irresponsible,” she added.
Unlike civilian employees covered by the Social Security System or government workers contributing to the Government Service Insurance System, MUP personnel are not required under the existing system to make mandatory pension contributions.
This leaves the government carrying a substantial share of the long-term financing burden.
Magno proposed establishing a separate pension fund that would be professionally managed and actuarially sound, with mandatory contributions from new entrants, an appropriate government counterpart and transparent governance.
She also called for a sustainable pension-indexation mechanism while protecting benefits already earned by current personnel and retirees.
“If we truly want to guarantee our men and women in uniform a pension when they retire, we must build a system that the country can actually afford to sustain,” she said.
Despite mounting pension costs, the government has yet to settle on a comprehensive overhaul.
The Department of Budget and Management said the MUP pension reform remains under a “comprehensive government review.”
The DBM said any recommendations would have to balance the long-term sustainability and equity of the pension system with the government’s commitment to protecting the welfare and benefits of military and uniformed personnel.
The department said fiscal considerations and the need to safeguard MUP benefits are both being weighed as the government examines possible reforms.
Executive Order 107 created an Inter-Agency Technical Working Group composed of representatives from the DBM, Department of Finance, Bureau of the Treasury and GSIS to work on the pension issue.
With the proposed MUP pension allocation now approaching P143 billion, the fiscal challenge is becoming increasingly difficult to ignore: the government must sustain the retirement benefits of those who serve while finding a way to prevent pension obligations from steadily crowding out funds needed to strengthen the country’s defense capabilities and other public priorities.
ia/xf
