DND allays fears on RSBS dissolution - Malaya 10.05.2006
THE Department of Defense yesterday said the new pension fund that will replace the cash-strapped Retirement and Separation Benefits Systems [RSBS] will apply to new recruits while current RSBS members have nothing to be alarmed about since some P10 billion in pension funds for their retirement will continue to be funded through the General Appropriations Act.
Defense Secretary Avelino Cruz said current RSBS members would still be required to continue their monthly contributions.
Cruz announced last Monday the dissolution of RSBS by year-end due to its "irreversible collapse" and "bankruptcy."
He said RSBS members should not worry even as Senate committee on national defense chair Rodolfo Biazon warned Malacañang and the AFP to "carefully resolve and carefully explain" the RSBS dissolution to the soldiers if they do not want it to become another issue "that could produce instability" in the AFP ranks.
Biazon said RSBS was created under Presidential Decree 361 and can only be dissolved by legislative action. Cruz himself said a newly formed DND-AFP committee is crafting a bill for submission to Congress before the year ends for the creation of a new system.
By end 2005, Cruz said the RSBS had a total of P11.6 billion in assets, P9.6 billion of which are invested directly in real estate and realty-related equity investments. The rest are in cash or invested in stocks.
Defense undersecretary Cecilio Lorenzo, who chaired the financial study made on RSBS, said the system’s assets, like the Riviera Golf course and Riviera town and country club in Cavite, will be gradually sold.
Lorenzo said his committee recommended the closure of RSBS because it will not be able to achieve sustained self-sufficiency due to inherent flaws in the retirement law itself and in its benefits features, particularly the refund of contributions plus six percent interest upon the retirement of the member.
He said such an interest rate cannot be supported by "even the most prudent investment management."
Cruz said the RSBS income is "insufficient" to cover the six percent interest. He said RSBS and its subsidiaries only posted a P40 million profit last year, from P127 million in 2003 and P223 million in 2004.
The RSBS collects about P700 million yearly from contributions of those in the active service, with P400 million of it funding the retirement fee of retirees. It spends P210 million for its operations and P90 million for salaries of employes.
"Transferring the funds to professional trust fund managers in the DBP and the Land Bank will result in a better yield that will ensure the return of contribution of our soldiers plus six percent interest per annum upon their retirement," said Cruz. He said this will also insulate the funds from being eaten up by the operating cost of RSBS.
Cruz said the new scheme for new recruits would involve a counterpart contribution from the national government. "It will include strict guidelines on organization powers, functions and very critically, very strict investment criteria of where these funds will be invested," he said.
The RSBS was created by President Ferdinand Marcos in 1973 and provided a seed money of P200 million. The intention was to create a self-sustaining funding mechanism that would cater to pension and separation requirements of the soldiers.
The system, however, failed due to liquidity problems caused by mismanagement. A number of past RSBS officers are facing graft charges for entering into questionable deals during their tenure.Cruz said the deactivation of RSBS will not stop the prosecution of ex- RSBS officials, including former AFP chief Gen. Lisandro Abadia and former RSBS president Jose Ramiscal. – Victor Reyes and Dennis Gadil
Defense Secretary Avelino Cruz said current RSBS members would still be required to continue their monthly contributions.
Cruz announced last Monday the dissolution of RSBS by year-end due to its "irreversible collapse" and "bankruptcy."
He said RSBS members should not worry even as Senate committee on national defense chair Rodolfo Biazon warned Malacañang and the AFP to "carefully resolve and carefully explain" the RSBS dissolution to the soldiers if they do not want it to become another issue "that could produce instability" in the AFP ranks.
Biazon said RSBS was created under Presidential Decree 361 and can only be dissolved by legislative action. Cruz himself said a newly formed DND-AFP committee is crafting a bill for submission to Congress before the year ends for the creation of a new system.
By end 2005, Cruz said the RSBS had a total of P11.6 billion in assets, P9.6 billion of which are invested directly in real estate and realty-related equity investments. The rest are in cash or invested in stocks.
Defense undersecretary Cecilio Lorenzo, who chaired the financial study made on RSBS, said the system’s assets, like the Riviera Golf course and Riviera town and country club in Cavite, will be gradually sold.
Lorenzo said his committee recommended the closure of RSBS because it will not be able to achieve sustained self-sufficiency due to inherent flaws in the retirement law itself and in its benefits features, particularly the refund of contributions plus six percent interest upon the retirement of the member.
He said such an interest rate cannot be supported by "even the most prudent investment management."
Cruz said the RSBS income is "insufficient" to cover the six percent interest. He said RSBS and its subsidiaries only posted a P40 million profit last year, from P127 million in 2003 and P223 million in 2004.
The RSBS collects about P700 million yearly from contributions of those in the active service, with P400 million of it funding the retirement fee of retirees. It spends P210 million for its operations and P90 million for salaries of employes.
"Transferring the funds to professional trust fund managers in the DBP and the Land Bank will result in a better yield that will ensure the return of contribution of our soldiers plus six percent interest per annum upon their retirement," said Cruz. He said this will also insulate the funds from being eaten up by the operating cost of RSBS.
Cruz said the new scheme for new recruits would involve a counterpart contribution from the national government. "It will include strict guidelines on organization powers, functions and very critically, very strict investment criteria of where these funds will be invested," he said.
The RSBS was created by President Ferdinand Marcos in 1973 and provided a seed money of P200 million. The intention was to create a self-sustaining funding mechanism that would cater to pension and separation requirements of the soldiers.
The system, however, failed due to liquidity problems caused by mismanagement. A number of past RSBS officers are facing graft charges for entering into questionable deals during their tenure.Cruz said the deactivation of RSBS will not stop the prosecution of ex- RSBS officials, including former AFP chief Gen. Lisandro Abadia and former RSBS president Jose Ramiscal. – Victor Reyes and Dennis Gadil
posted by brodkaster43 at Huwebes, Oktubre 05, 2006
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