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again.
Source: AFP-PGMC
Source of basic data: AFP-PGMC
At A Glance
January 2012 AG-12-01
The AFP Pension System
Table 1. Actual Number of AFP Retirees, 2005-2010
Source: AFP-PGMC
97,789 98,928 101,003 101,797 106,910 111,404
151,256
133,979 129,809 129,865 131,506 133,855
0
50,000
100,000
150,000
200,000
2005 2006 2007 2008 2009 2010
Figure 2. Numberof AFP Pensionersvs.Personnel
inActive Service,2005-2010
Number ofpensioners Number ofpersonnel inactiveservice
The Armed Forces of the Philippines Retirement and Separation Benefits System (AFP-RSBS) was established on
December 30, 1973 by virtue of Presidential Decree (PD) No. 361, as amended by PD 1656, to provide retirement
and separation benefits to the military members of the AFP. However, because it failed on its mandate to
become a self-sustaining military pension fund, the AFP-RSBS was eventually dissolved on December 31, 2006
thru Executive Order No. 590. With the growing number of pensioners and their benefits continuously being
fully funded out of the annual appropriations for the AFP, fears of a looming pension crisis is now growing.
Based on records of the AFP Pension and Gratuity Management Center (AFP-PGMC), the government has yet to
pay pension arrears amounting to PhP16 billion for almost 112,000 military personnel.
AFP Retirees. Of the total number of
retirees from the different service units
of the AFP, those from the Philippine
Army account for more than half (67.4%)
while the Philippine Air Force and the
Philippine Navy account for 15.7% and
14.8%, respectively. The Technical
Administrative Service, which includes
the personnel from the General
Headquarters Proper, the AFP Medical
Center, the Philippine Military Academy
and the Presidential Security Group, has
the lowest share at only 2.1%. From
2005 to 2010, an average of 5,419
military men retired every year. Based
on the projections of the AFP-PGMC,
about 6,000 personnel will retire
annually from 2011 to 20181
.
AFP pensioners. With the constant slew
of military men retiring every year, the
number of pensioners in the AFP
continuously increased. From 2005 to
2010, the pace of growth in the number
of AFP pensioners even exceeded the
growth rate of AFP personnel in active
service. While pensioners grew by an
annual average of 2.65%, the average
annual growth rate of the number of
active personnel declined by 2.29%
during the said period. However,
starting 2008, the number of personnel
in active service has started increasing
1
This includes the retirees under Section 4 and Section 5(a) of PD 1638. Section 4 is an optional retirement for uniformed
personnel who have rendered at least 20 years of active service while Section 5(a) is compulsory retirement for uniformed
personnel at the age of 60 and have rendered at least 15 years of active service.
Branch of Service 2005 2006 2007 2008 2009 2010
Phil. Army 3,097 3,509 4,431 3,259 3,599 3,097
Phil. Air Force 763 1,032 879 772 721 720
Phil. Navy 888 1,110 1,128 1,191 1,084 682
Tech. Admin. Service 88 103 99 81 88 95
Total 4,836 5,754 6,537 5,303 5,492 4,594
Source: AFP-PGMC
Table 2. Actual Number of AFP Retirees, 2005-2010 (in billion PhP)
Source: AFP- GCMC
0
50
100
150
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Figure 3. ProjectedPensionvs. Active MilitaryPay,
2011-2026 (inbillionPhP)
Salaries Pension
Source: AFP-PGMC
The AFP Pension Budget.
Accordingly, from merely PhP9.7
billion in 2005, the budget for
military pension and retirement
benefits ballooned to PhP24.1
billion in 2011, a 149% increase in a
span of seven (7) years.
While the annual budget for those
in active service grew by a yearly
average of 3.6% or about PhP1.3
billion from 2005 to 2010, the
allocation for pensioners increased
by an annual average rate of 15.1%
or by PhP1.9 billion every year.
It is projected that the budget for
AFP pensioners will overtake the
salary allocation for active
servicemen by 2017. On the said
year, pension pay is expected to
amount to PhP54.1 billion
compared to the salary of active
military personnel which is
estimated at PhP51.9 billion.
Separation and Retirement Benefits. At present, an amount equivalent to five percent (5%) of their monthly
base pay is automatically deducted from the salaries of all active officers and enlisted personnel of the AFP.
Upon a personnel’s separation or retirement from the service, he or she is refunded in one lump sum all of his
or her contributions2
.
PD 1638 otherwise known as the AFP Retirement Law of 1979 also provides that when an AFP officer or
enlisted personnel is retired from the AFP, he or she shall, at his or her option, receive a gratuity equivalent to
one (1) month of base and longevity pay of the grade next higher than the permanent grade he or she last held
for every year of service. This gratuity is payable in one (1) lump sum or a monthly retirement pay, the
equivalent of which is computed as follows:
Survivors of AFP officers and enlisted personnel also receive survivorship benefits. In addition, Section 17 of PD
1638 provides that when the salaries of active soldiers increase, the pension of retirees also increase. AFP
pensioners are, thus, also benefiting from the on-going implementation of the Salary Standardization Law III3
.
Reforming the AFP Pension Scheme. To reduce the government’s ballooning pension requirements, the AFP
management is currently drafting a proposal which aims to reform the Armed Forces’ retirement scheme and
create the Philippine Military Pension System or the PMPS. The PMPS is envisioned to function as a
government-owned and controlled corporation which will establish a self-reliant funding scheme to guarantee
the payment of benefits of AFP retirees and pensioners. Other reform proposals include the repeal of the
automatic indexation of the pension to the prevailing salaries of active soldiers, the raising of the mandatory
retirement age to 58 from 56, the increase in the minimum years of service to 25 years from 20 years, as well
as the reduction of the survivorship benefit to 50% of a soldier’s pension from the current 75%.
2
By virtue of PD 1656.
3
Passed in 2008, the Salary Standardization Law III increased the salaries of all government employees. The salary
adjustments are to be made in four (4) tranches, the last of which is scheduled in 2012.
2005 2006 2007 2008 2009 2010
AFP Budget for Personnel
in Active Service 35.9 35.8 36.3 36.7 41.6 42.6
Phil. Army 20.1 20.1 21.9 22.2 25.5 25.6
Phil. Air Force 4.6 4.4 4.9 4.9 5.5 5.5
Phil. Navy 6.5 6.7 7.1 7.5 8.2 9.1
Tech. Admin. Service 4.7 4.7 2.4 2.1 2.4 2.4
AFP Budget for Pension
and Retirement Benefits
9.7 10.0 11.4 13.5 15.9 19.4
Phil. Army 5.9 6.1 7.7 8.2 10.4 13.0
Phil. Air Force 1.7 1.8 1.5 2.0 2.1 3.1
Phil. Navy 1.8 1.9 1.9 3.0 3.2 2.9
Tech. Admin. Service 0.2 0.2 0.2 0.3 0.3 0.4
Monthly Pension = (Base Pay + Longevity Pay) x (2.5 Percent x Number of Years in Service)

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Senate study on the afp pension system

  • 1. again. Source: AFP-PGMC Source of basic data: AFP-PGMC At A Glance January 2012 AG-12-01 The AFP Pension System Table 1. Actual Number of AFP Retirees, 2005-2010 Source: AFP-PGMC 97,789 98,928 101,003 101,797 106,910 111,404 151,256 133,979 129,809 129,865 131,506 133,855 0 50,000 100,000 150,000 200,000 2005 2006 2007 2008 2009 2010 Figure 2. Numberof AFP Pensionersvs.Personnel inActive Service,2005-2010 Number ofpensioners Number ofpersonnel inactiveservice The Armed Forces of the Philippines Retirement and Separation Benefits System (AFP-RSBS) was established on December 30, 1973 by virtue of Presidential Decree (PD) No. 361, as amended by PD 1656, to provide retirement and separation benefits to the military members of the AFP. However, because it failed on its mandate to become a self-sustaining military pension fund, the AFP-RSBS was eventually dissolved on December 31, 2006 thru Executive Order No. 590. With the growing number of pensioners and their benefits continuously being fully funded out of the annual appropriations for the AFP, fears of a looming pension crisis is now growing. Based on records of the AFP Pension and Gratuity Management Center (AFP-PGMC), the government has yet to pay pension arrears amounting to PhP16 billion for almost 112,000 military personnel. AFP Retirees. Of the total number of retirees from the different service units of the AFP, those from the Philippine Army account for more than half (67.4%) while the Philippine Air Force and the Philippine Navy account for 15.7% and 14.8%, respectively. The Technical Administrative Service, which includes the personnel from the General Headquarters Proper, the AFP Medical Center, the Philippine Military Academy and the Presidential Security Group, has the lowest share at only 2.1%. From 2005 to 2010, an average of 5,419 military men retired every year. Based on the projections of the AFP-PGMC, about 6,000 personnel will retire annually from 2011 to 20181 . AFP pensioners. With the constant slew of military men retiring every year, the number of pensioners in the AFP continuously increased. From 2005 to 2010, the pace of growth in the number of AFP pensioners even exceeded the growth rate of AFP personnel in active service. While pensioners grew by an annual average of 2.65%, the average annual growth rate of the number of active personnel declined by 2.29% during the said period. However, starting 2008, the number of personnel in active service has started increasing 1 This includes the retirees under Section 4 and Section 5(a) of PD 1638. Section 4 is an optional retirement for uniformed personnel who have rendered at least 20 years of active service while Section 5(a) is compulsory retirement for uniformed personnel at the age of 60 and have rendered at least 15 years of active service. Branch of Service 2005 2006 2007 2008 2009 2010 Phil. Army 3,097 3,509 4,431 3,259 3,599 3,097 Phil. Air Force 763 1,032 879 772 721 720 Phil. Navy 888 1,110 1,128 1,191 1,084 682 Tech. Admin. Service 88 103 99 81 88 95 Total 4,836 5,754 6,537 5,303 5,492 4,594
  • 2. Source: AFP-PGMC Table 2. Actual Number of AFP Retirees, 2005-2010 (in billion PhP) Source: AFP- GCMC 0 50 100 150 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Figure 3. ProjectedPensionvs. Active MilitaryPay, 2011-2026 (inbillionPhP) Salaries Pension Source: AFP-PGMC The AFP Pension Budget. Accordingly, from merely PhP9.7 billion in 2005, the budget for military pension and retirement benefits ballooned to PhP24.1 billion in 2011, a 149% increase in a span of seven (7) years. While the annual budget for those in active service grew by a yearly average of 3.6% or about PhP1.3 billion from 2005 to 2010, the allocation for pensioners increased by an annual average rate of 15.1% or by PhP1.9 billion every year. It is projected that the budget for AFP pensioners will overtake the salary allocation for active servicemen by 2017. On the said year, pension pay is expected to amount to PhP54.1 billion compared to the salary of active military personnel which is estimated at PhP51.9 billion. Separation and Retirement Benefits. At present, an amount equivalent to five percent (5%) of their monthly base pay is automatically deducted from the salaries of all active officers and enlisted personnel of the AFP. Upon a personnel’s separation or retirement from the service, he or she is refunded in one lump sum all of his or her contributions2 . PD 1638 otherwise known as the AFP Retirement Law of 1979 also provides that when an AFP officer or enlisted personnel is retired from the AFP, he or she shall, at his or her option, receive a gratuity equivalent to one (1) month of base and longevity pay of the grade next higher than the permanent grade he or she last held for every year of service. This gratuity is payable in one (1) lump sum or a monthly retirement pay, the equivalent of which is computed as follows: Survivors of AFP officers and enlisted personnel also receive survivorship benefits. In addition, Section 17 of PD 1638 provides that when the salaries of active soldiers increase, the pension of retirees also increase. AFP pensioners are, thus, also benefiting from the on-going implementation of the Salary Standardization Law III3 . Reforming the AFP Pension Scheme. To reduce the government’s ballooning pension requirements, the AFP management is currently drafting a proposal which aims to reform the Armed Forces’ retirement scheme and create the Philippine Military Pension System or the PMPS. The PMPS is envisioned to function as a government-owned and controlled corporation which will establish a self-reliant funding scheme to guarantee the payment of benefits of AFP retirees and pensioners. Other reform proposals include the repeal of the automatic indexation of the pension to the prevailing salaries of active soldiers, the raising of the mandatory retirement age to 58 from 56, the increase in the minimum years of service to 25 years from 20 years, as well as the reduction of the survivorship benefit to 50% of a soldier’s pension from the current 75%. 2 By virtue of PD 1656. 3 Passed in 2008, the Salary Standardization Law III increased the salaries of all government employees. The salary adjustments are to be made in four (4) tranches, the last of which is scheduled in 2012. 2005 2006 2007 2008 2009 2010 AFP Budget for Personnel in Active Service 35.9 35.8 36.3 36.7 41.6 42.6 Phil. Army 20.1 20.1 21.9 22.2 25.5 25.6 Phil. Air Force 4.6 4.4 4.9 4.9 5.5 5.5 Phil. Navy 6.5 6.7 7.1 7.5 8.2 9.1 Tech. Admin. Service 4.7 4.7 2.4 2.1 2.4 2.4 AFP Budget for Pension and Retirement Benefits 9.7 10.0 11.4 13.5 15.9 19.4 Phil. Army 5.9 6.1 7.7 8.2 10.4 13.0 Phil. Air Force 1.7 1.8 1.5 2.0 2.1 3.1 Phil. Navy 1.8 1.9 1.9 3.0 3.2 2.9 Tech. Admin. Service 0.2 0.2 0.2 0.3 0.3 0.4 Monthly Pension = (Base Pay + Longevity Pay) x (2.5 Percent x Number of Years in Service)