P143-Billion MUP Pension Nearly Triple AFP’s Modernization Budget

The Marcos administration is proposing to spend P142.95 billion on military and uniformed personnel (MUP) pensions next year, a bill that adds urgency to long-delayed efforts to overhaul the pension system, while keeping a fair compensation for the troops.

Based on the National Expenditure Program, the MUP pensions will be allocated P142.95 billion for 2027, 6.8 percent above the P133.91 billion in the 2026 General Appropriations Act.

For former finance undersecretary Cielo Magno, the rising costs under the proposed 2027 national budget “illustrate why we can no longer postpone reform of the military and uniformed personnel pension system.”

The amount is almost three times the P50 billion earmarked for the entire Revised Armed Forces of the Philippines Modernization Program, Magno said.

“Unfortunately, this fiscal burden will continue to grow,” she told The Philippine STAR in an interview.

“We should compensate our soldiers and uniformed personnel fairly, but we must also confront the trade-off: resources consumed by an ever-growing pension bill are resources we cannot use to modernize our Armed Forces, strengthen territorial defense and fund other essential public services,” Magno added.

Lawmakers have continued to push legislation to overhaul the MUP pension system, although proposals remain pending in Congress.

In January, then-acting budget secretary Rolando Toledo said the MUP pension system needs to be studied again, warning its implications for the fiscal budget could be significant.

Magno noted that the Duterte administration substantially hiked salaries of MUP in 2018 to 2019, while Marcos similarly approved salary increases.

Executive Order No. 107, issued in December 2025, updated the base pay schedule and increased the subsistence allowance of MUP. Under Section 3, the salary adjustment is being implemented in three tranches, beginning Jan. 1, 2026, followed by the second tranche in 2027 and the third in 2028.

“Every salary adjustment creates not only a higher compensation expenditure today, but a larger pension obligation for taxpayers for years to come. Despite repeated warnings about this problem, structural pension reform has been repeatedly deferred. That is fiscally irresponsible,” Magno said.

Under the current system, MUP personnel are not required to make mandatory pension contributions, unlike civilian workers who contribute a portion of their salaries to the Social Security System or the Government Service Insurance System (GSIS) for state workers, which in turn eases the burden of financing from the government.

“We need a separate, professionally managed and actuarially sound pension fund, with mandatory contributions for new entrants, an appropriate government counterpart, transparent governance and a sustainable indexation mechanism, while fully protecting benefits already earned by existing retirees and personnel,” Magno said.

“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 added.

Still under review

The Department of Budget and Management (DBM) said the MUP pension reform remains under “comprehensive government review.”

“Any recommendations arising from this process will have to carefully balance the long-term sustainability and equity of the pension system with the government’s continuing commitment to safeguard the welfare and benefits of our MUPs,” DBM told The STAR.

The DBM said the government continues to review possible reforms, factoring both fiscal considerations and the need to protect the welfare and benefits of military and uniformed personnel.

EO 107 created an Inter-Agency Technical Working Group composed of representatives from the DBM, Department of Finance, Bureau of the Treasury and GSIS.