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TWENTIETH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
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25 JUL29 PI :02
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SENATE
S.B. No. 748
RlXrJV.OB
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,n 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, highiighting 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.
. MARCOS


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TWENTIETH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
)
SENATE
S.B. No. 748
t-*..-. L i«^' 
uf I'i'
25 JUL 29 PI :03
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 Phiiippines in Congress 
assembled:
SECTION 1. Short Title. - This law shall be known as the "Armed Forces of the 
Philippines (AFP) Pension System Act".
SEC. 2. Declaration of State Policy. - The State duly recognizes the vital role of 
the Armed Forces of the Philippines (AFP) in ensuring security, promoting peace and 
order, and strengthening local government capacity to effectively deliver of basic 
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 
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 
and orphans.
SEC. 3. Funding Sources. - The pensions and retirement benefits of AFP 
members shall be sourced from the following:


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


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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%) 
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 
years (20), up to a maximum of ninety percent (90%) for thirty-six (36) years of active 
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, implemented 
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 
Coordination Committee.


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SEC. 8. AFP Trust Fund. -There is hereby created an AFP Trust Fund which
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shall be established to support the separation and retirement benefits of the AFP,
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including the payment of disability and survivorship pension under existing laws.
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SEC. 9. AFP Trust Fund Committee. - There is hereby created an AFP Trust
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Fund Committee, which shall be created after the effectivity of this Act and shall be
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composed of the following members:
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a) 
Secretary of Finance, who shall serve as the Chairperson;
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b) 
Chief of Staff of the AFP;
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c) 
Secretary of National Defense;
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d) 
Administrator of the Philippine Veterans Affairs Office (PVAO);
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e) 
President and General Manager of the Government Sen/ice Insurance
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System (GSIS); and
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f) 
Four (4) qualified and competent economic managers with proven
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business and financial experience and expertise, who shall be appointed by the
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President.
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The Bureau of Treasury shall serve as the Secretariat of the Committee and shall
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be responsible for maintaining the records and accounts of all investments, receipts,
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disbursements, and other transactions relating to the management, administration, and
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utilization of the AFP Trust Fund. Provided, That such records and accounts shall be
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maintained in accordance with existing accounting and auditing laws, rules and
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regulations, and shail be subject to audit by the Commission on Audit (COA).
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Sec. 10. Powers and Functions of the AFP Trust Fund Committee. - The
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Committee shall exercise the following powers and functions:
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a) 
Act as Trustee of the AFP Trust Fund and such other assets as may be
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assigned to the pension system of the AFP Personnel;
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b) 
Manage the AFP Trust Fund, through the fund manager designated under
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Sec. 11 of this Act, and ensure that the fund is actuarially and financially optimal and
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sustainable;


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c) 
Authorize the necessary expenses to manage and administer the AFP
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Trust Fund;
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d) 
Implement and execute functions related to the disposition of assets
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identified under this Act;
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e) 
Declare dividends out of the unrestricted earnings of the AFP Trust Funds,
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which shall be payable in cash;
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f) 
Cause the undertaking of a survey or consultation to assess the
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preferences of the AFP Personnel on the features of the pension system, including the
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manner to pay for contributions and interest in various benefit and investment
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schemes;
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g) 
Commission on actuarial evaluation of the fiscal sustainability of the
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pension scheme, including specific recommendations on the rates for contributions and
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investment options for the AFP Trust Fund, as applicable;
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h) 
Authorize the necessary expenses to manage and administer the AFP
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Trust Fund; and
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Perform such other functions as may be necessary for the effective
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management of the AFP Trust Fund;
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Provided, That within one (1) year from the effectivity of this Act, the fund
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manager shall conduct the studies prescribed under this Section. Provided, further,
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That the findings and recommendations obtained from the said studies shall be
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submitted to the Committee, which shall promulgate the implementing rules and
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regulations with respect to the mandatory contribution scheme and other features of
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the pension scheme, as applicable.
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SEC. 11. Manager of the AFP Trust Fund. - The GSIS is hereby designated as
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the fund manager and benefits administrator of the AFP Trust Fund, and shall perform
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the following functions:
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a) 
Implement an investment management and benefits administration
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strategy as directed by the Committee;


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b) 
Monitor market and economic trends and track securities to make 
informed investment decisions;
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Recommend its portfolio strategy to the Committee;
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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
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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). 
Provided, further, That the GSIS shall be entitled to management fees, which shall be 
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


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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 
Act, except as otherwise provided herein, shall not be subject to attachment, 
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. 
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


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regulations, or other issuances or parts thereof inconsistent with the provisions of this
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Act are hereby repealed or modified accordingly.
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Sec. 21. Effectivity Clause. - This Act shall take effect after fifteen (15) days
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following the completion of its publication in the Official Gazette or in a newspaper of
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general circulation in the Philippines.
Approved,