Armed Forces of the Philippines (AFP) Pension System Act

Offier after TWENTIETH CONGRESS OF THE ) REPUBLIC OF THE PHILIPPINES P1:02 JUL First Regular Session SENATE RECST-OL S.B. No. - Introduced by SENATOR IMEE R. MARCOS AN ACT CREATING A SUSTAINABLE FRAMEWORK FOR THE PENSION SYSTEM OF THE ARMED FORCES OF THE PHILIPPINES, APPROPRIATING FUNDS THEREFOR, AND FOR OTHER PURPOSES EXPLANATORY NOTE

Section 8, Article XVI of the 1987 Philippine Constitution provides that, " the State

shall, from time to time, review to increase the pensions and other benefits due to retirees of both the government and private sectors." Furthermore, the State recognizes the crucial and indispensable role of the Armed Forces of the Philippines (AFP) in protecting the Filipino people and ensuring the sovereignty and territorial integrity of the country. It also acknowledges the extraordinary dangers, hazards, risks, and perils that members of the AFP encounter in the performance of their official functions and duties. Thus, it is the State's paramount concern that these brave men and women, and their families, receive adequate pension and retirement benefits commensurate to their invaluable service and sacrifices. Currently, pension and retirement benefits for Military and Uniformed Personnel (MUP), including those from the AFP, are solely funded by the annual General Appropriations of the National Government. This non-contributory scheme, coupled with the indexation of pension benefits to the salary hikes of those in active service, has rendered the system increasingly onerous and fiscally unsustainable. In fact, the government foresees that it will need to allocate approximately Php 537 billion in 2030 and a staggering PhP 1.5 trillion in 2040 to meets it MUP pension commitments. If not addressed, the rising cost will continue to grow, potentially compromising other critical government development initiatives. This situation urgently necessitates the identification and establishment of additional, diversified, and sustainable sources of financing other than the national budget. As of 2025, out of the Php 30.409 billion approved for release to cover the regular pension requirements of MUP for the first quarter, a total of 16.752 billion has already been released to the AFP - General Headquarters-Proper and the Philippine

Veterans Affairs Office (PVAO). This disbursement is based on the actual pension payroll it submitted as of 31 December 2024, highlighting the significant and growing responsibility of the State. Therefore, this bill seeks to establish and provide a financially viable and sustainable framework for the pension system of the AFP, ensuring the long-term security and welfare of its retirees and their dependents. In light of these considerations, the passage of this bill is earnestly sought. Fee h. Marea IMEER. MARCOS

Patri REPUBLIC OF THE PHILIPPINES P1:03 REFUSE OF HEREINEE JUL 29 First Regular Session SENATE RECEN ED EY S.B. No. - Introduced by SENATOR IMEE R. MARCOS AN ACT CREATING A SUSTAINABLE FRAMEWORK FOR THE PENSION SYSTEM OF THE ARMED FORCES OF THE PHILIPPINES, APPROPRIATING FUNDS THEREFOR, AND FOR OTHER PURPOSES Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

SECTION 1. Short Title. - This law shall be known as the "Armed Forces of the

2 Philippines (AFP) Pension System Act".

SEC. 2. Declaration of State Policy. - The State duly recognizes the vital role of

5 the Armed Forces of the Philippines (AFP) in ensuring security, promoting peace and 6 order, and strengthening local government capacity to effectively deliver of basic 7 services to the citizenry. The State also recognizes the inherent and extraordinary hazards, risks, perils, and dangers that the members of the AFP encounter in the 9 performance of their official functions and duties. To compensate for the invaluable service rendered during their years in active duty, it shall be the State's primary responsibility to ensure the provision of adequate pensions and retirement benefits to all AFP retirees, as well as their surviving spouses 13 and orphans.

SEC. 3. Funding Sources. - The pensions and retirement benefits of AFP

members shall be sourced from the following:

a) New entrants of the AFP shall contribute nine percent (9%) of their basic monthly compensation as their personal share to the AFP Trust Funds while twelve percent (12%) shall be provided by the National Government as its share to the AFP Trust Funds. Provided, That for purposes of this Act, "new entrant" shall refer to military and uniformed personnel who are newly-appointed, newly-recruited, or newly re-admitted after the effectivity of this Act. Provided, further, That the AFP Trust Fund Committee created under Sec. 10 of this Act may determine the amount necessary to capitalize and sustain the AFP Trust Funds; b) Residual assets of the AFP Retirement Separation Benefits System; c) The proceeds from the sale of military reservations, as may be authorized by Congress, pursuant to the provisions of existing laws and regulations governing sales of government properties, including such immovable and other facilities as may be found therein, not otherwise covered by Republic Act No. 7227, otherwise known as the "Bases Conversion and Development Act of 1992," as amended; d) The proceeds from the lease or joint development of military reservations, as may be authorized by the President, pursuant to the provisions of existing laws and regulations governing lease or joint development of government properties, including such immovables and other facilities as may be found therein, not specifically enumerated under Republic Act No. 7227, as amended; e) Shares of the AFP from the proceeds of the sale of military camps provided for under Republic Act No. 7227, as amended, and at least fifty (50%) of the proceeds, net of direct expenses authorized to be deducted from such proceeds from the lease and/or joint venture agreements and such other dispositions pertaining to the same camps in accordance with applicable and/or existing orders, rules, regulations and issuances; and f) Proceeds derived from public-private partnerships entered into by the Department of National Defense (DND) or the AFP, as may be authorized by the President, pursuant to the provisions of existing laws and regulations.

SEC. 4. Compulsory and Optional Retirement. - Active AFP personnel shall be

compulsorily retired upon reaching the age of fifty-seven (57) years old and may voluntarily retire upon accumulation of twenty (20) years of satisfactory active service, subject to the approval of the appropriate authority.

SEC. 5. Retirement Pay. - Monthly retirement pay shall be fifty percent (50%)

7 of the base pay and longevity pay of the grade next higher than the permanent grade last held by the personnel for twenty (20) years of active service, increasing by two and one-half percent (2.5%) for each year of active service rendered beyond twenty 10 years (20), up to a maximum of ninety percent (90%) for thirty-six (36) years of active 11 service and over. Provided, That nothing in this Section shall be construed as authorizing adjustment of pay or payment of any differential in retirement pay to AFP personnel who are already retired prior to the approval of this Act.

SEC. 6. Separation Pay. - Any AFP personnel who shall separate or resign from

the service without having rendered twenty (20) years of satisfactory active service shall receive a separation pay equivalent to one (1) month's base pay and longevity pay of the permanent grade the AFP personnel holds at the time of separation, for every year of active service rendered.

SEC. 7. Capped Automatic Indexation to Adjustments. - The pension of retired

AFP Personnel and the survivorship pension of qualified survivors shall be subject to an automatic indexation equivalent to one hundred percent (100%) of the increase in the base pay of the AFP Personnel in active service holding the same rank, implementec during the same year. Provided, That the President of the Philippines, upon recommendation of the AFP Personnel Trust Fund Committee, is authorized to adjust the pension and survivorship pension at a rate lower than that prescribed herein, in cases of adverse economic conditions as certified by the Development Budget 29 Coordination Committee.

SEC. 8. AFP Trust Fund. - There is hereby created an AFP Trust Fund which

shall be established to support the separation and retirement benefits of the AFP, including the payment of disability and survivorship pension under existing laws.

SEC. 9. AFP Trust Fund Committee. - There is hereby created an AFP Trust

6 Fund Committee, which shall be created after the effectivity of this Act and shall be composed of the following members: a) Secretary of Finance, who shall serve as the Chairperson; b) Chief of Staff of the AFP; c) Secretary of National Defense; d) Administrator of the Philippine Veterans Affairs Office (PVAO); e) President and General Manager of the Government Service Insurance System (GSIS); and f) Four (4) qualified and competent economic managers with proven business and financial experience and expertise, who shall be appointed by the President. The Bureau of Treasury shall serve as the Secretariat of the Committee and shall be responsible for maintaining the records and accounts of all investments, receipts, disbursements, and other transactions relating to the management, administration, and utilization of the AFP Trust Fund. Provided, That such records and accounts shall be maintained in accordance with existing accounting and auditing laws, rules and regulations, and shail be subject to audit by the Commission on Audit (COA).

Sec. 10. Powers and Functions of the AFP Trust Fund Committee. - The

Committee shall exercise the following powers and functions: a) Act as Trustee of the AFP Trust Fund and such other assets as may be assigned to the pension system of the AFP Personnel; b) Manage the AFP Trust Fund, through the fund manager designated under

Sec. 11 of this Act, and ensure that the fund is actuarially and financially optimal and

sustainable;

c) Authorize the necessary expenses to manage and administer the AFP Trust Fund; d) Implement and execute functions related to the disposition of assets identified under this Act; e) Declare dividends out of the unrestricted earnings of the AFP Trust Funds, 6 which shall be payable in cash; Cause the undertaking of a survey or consultation to assess the preferences of the AFP Personnel on the features of the pension system, including the manner to pay for contributions and interest in various benefit and investment schemes; g) Commission on actuarial evaluation of the fiscal sustainability of the pension scheme, including specific recommendations on the rates for contributions and investment options for the AFP Trust Fund, as applicable; h) Authorize the necessary expenses to manage and administer the AFP Trust Fund; and Perform such other functions as may be necessary for the effective management of the AFP Trust Fund; Provided, That within one (1) year from the effectivity of this Act, the fund manager shall conduct the studies prescribed under this Section. Provided, further, That the findings and recommendations obtained from the said studies shall be submitted to the Committee, which shall promulgate the implementing rules and regulations with respect to the mandatory contribution scheme and other features of the pension scheme, as applicable.

SEC. 11. Manager of the AFP Trust Fund. - The GSIS is hereby designated as

the fund manager and benefits administrator of the AFP Trust Fund, and shall perform the following functions: a) Implement an investment management and benefits administration strategy as directed by the Committee;

b) Monitor market and economic trends and track securities to make informed investment decisions; C) Recommend its portfolio strategy to the Committee; d) Track financial results of companies within the portfolio and their various metrics, including price-to-earnings ratios, inflation-adjusted returns, sales, earnings, and dividends; and e) Perform such other acts necessary to fulfill its mandate under this Act, or as may be delegated by the Committee.

SEC. 12. Structure, Staffing Pattern, and Operating Budget. - The

organizational structure and staffing pattern for the management of the AFP Trust Fund within the GSIS and for the creation of the AFP Trust Fund Secretariat within the Bureau of the Treasury (BTr) shall be approved by the Committee within ninety (90) days from the effectivity of this Act. Provided, That appointees to various positions shall comply with the qualification standards approved by the Civil Service Commission (CSC). 15 Provided, further, That the GSIS shall be entitled to management fees, which shall be 16 charged against the AFP Trust Fund.

SEC. 13. Government Guarantee. - The Government of the Republic of the

Philippines hereby guarantees the fulfillment of the obligations of the AFP Trust Fund to its members as and when they fall due.

SEC. 14. Administration Fees. - Any cost, expense, or other payment directly

attributable to the management and administration of the AFP Trust Fund shall be charged to the AFP Trust Fund.

SEC. 15. Exemptions from Tax, Legal Process, and Lien. - Notwithstanding any

provision of law to the contrary, all contributions to the AFP Trust Fund and all accruals thereto and income or investment earnings therefrom shall be exempt from any tax, assessment, fee, charge, or customs or import duty, in accordance with Section 39 of

1 Republic Act No. 8291, otherwise known as "The Government Service Insurance System Act of 1997."

SEC. 16. Non-encumbrance of Benefits. - The benefits authorized under this

5 Act, except as otherwise provided herein, shall not be subject to attachment, 6 garnishment, levy, execution, or any tax whatsoever, and may not be assigned, ceded, or conveyed to any third person. Provided, That if a retired or separated military personnel entitled to any benefit under this Act has unsettled money or property accountabilities incurred while in the active service, an amount not exceeding fifty percent (50%) of the pension, gratuity, or other payment due to the military personnel or their survivors under this Act may be withheld and be applied to settle such accountabilities.

SEC. 17. Appropriations. - Upon effectivity of this Act, an amount of Twenty-

Five Million Pesos (Php 25,000,000.00) shall be allocated to the AFP Trust Fund. 16 Thereafter, the amount necessary for the effective implementation of this Act shall be included in the annual General Appropriations Act (GAA).

SEC. 18. Implementing Rules and Regulations - Within ninety (90) days from

the effectivity of this Act, the Committee, in coordination with the GSIS, shall promulgate the rules and regulations to necessary to effectively implement the provisions of this Act.

Sec. 19. Separability Clause. - If, for any reason, any section or provision of this

Act is declared unconstitutional or invalid, other sections or provisions which are not affected thereby shall continue to be in full force and effect.

Sec. 20. Repealing Clause. - All laws, presidential decrees or issuances,

executive orders, proclamations, administrative orders, ordinances, rules or

1 regulations, or other issuances or parts thereof inconsistent with the provisions of this 2 Act are hereby repealed or modified accordingly.

Sec. 21. Effectivity Clause. - This Act shall take effect after fifteen (15) days

4 following the completion of its publication in the Official Gazette or in a newspaper of 5 general circulation in the Philippines. Approved,