By Chloe Mari A. Hufana, A reporter
THE Philippine government is studying a proposal to renew the military and uniformed pension system (MUP), the Department of Finance and Management (DBM) said amid concerns about its sustainability.
Acting Budget Secretary Roland U. Toledo said the pension plan is under review, citing provisions under Executive Order No. 107 which authorizes the reading of the MUP retirement terms.
“I think [the MUP pension reform] we need to be read again. The impact on the fiscal budget could be huge,” he told the Palace briefing in mixed English and Filipino.
“At the same time, Executive Order No. 107 assigned a technical task force to look into it, with a particular focus on the pension needs of our military and uniformed personnel.”
The Development Budget Coordination Committee (DBCC) previously flagged the rapidly rising pension costs of the MUP as a growing threat to the Philippines’ fiscal stability.
In its Fiscal Risks Statement for 2026, the interagency body said the non-contributory MUP pension scheme – fully funded by the national budget – could strain government finances and put pensioners at risk in the event of economic or financial shocks.
DBCC noted that unfunded liabilities have ballooned over the years due to the default indexation of the MUP pension. This may further complicate the budget due to the absence of changes such as the approval of new entrant contributions, salary changes, and finding sustainable funding sources.
Previous proposals have included removing the automatic index, which requires contributions, raising the retirement age, and creating a separate fund for new workers, but the committee stressed that any changes must take into account long-term financial sustainability and political realities.
The reassessment comes despite a 2023 recommendation by the Treasury Department under then-Secretary Benjamin E. Diokno to pursue legislative changes to address the ballooning costs of the non-cash pension plan.
Asked if that proposal will be the basis for reforms under the Marcos administration, Mr. Toledo said another review should contribute to progress since then.
“That happened a few years ago and there has been progress during this administration,” he said. “This will be re-examined, especially because the financial implications could be huge.”
Mr. Toledo noted that a total of P21.7 billion was allocated to the MUP this year under the budget, while P15.4 billion was set aside for active duty and P6.3 billion was set aside for pension obligations.
Concerns have intensified over the provision of indexation, which automatically adjusts pensions in line with wage increases for those who work.
“There will come a time when those pension needs will continue to grow and may become unsustainable,” Mr Toledo said, adding that this is why the review is ongoing.
Meanwhile, the Budget official said the government has set aside money to meet existing obligations.
Philippine Army Vice Commander Lt. Gen. Rommel P. Roldan assured the retirees that any future changes will not affect current pensioners or those close to retirement.
He said previous reform efforts were designed to work for newcomers to the profession.
John Paolo R. Rivera, a senior researcher at the Philippine Institute for Development Studies, said that in the short term the reform of the MUP pension could create temporary costs such as government increases, harmonization of benefits or financing the transition to a new system.
“[This] may temporarily increase spending and require careful monitoring. But these costs are usually front-loaded and manageable if changes are made in stages,” he said of Viber.
Mr. Rivera added that well-done pension reform could reduce long-term budget pressures by curbing debt growth and freeing up funds for early spending.
“The key trade-off is accepting short-term maintenance costs to secure long-term financial savings and reliability over time,” he said.
The MUP pension scheme, which is fully funded by the national government, has long been flagged by economic managers as a growing strain on public finances.
In December, Mr. Marcos ordered a review of the MUP pension system after giving salary and benefit increases.
The review, ordered amid the implementation of the recent wage hike, aims to assess the sustainability and possible changes to the non-contributory pension system.
