FOURTEENTH CONGRESS OF THE REPUBLIC 
) 
'
8
 
OF THE PHILIPPINES 
) 
First Regular Session 
) 
pa 37 
S E N A T E  
EXPLANATORY NOTE 
In 1979, then President Marcos issued PD. No. 1638 entitled "Establishing 
A New System Of Retirement And Separation For Military Personnel Of The 
Armed Forces Of The Philippines And For Other Purposes" which consolidated 
and improved the various laws then pertaining to the retirement of officers and 
members of the Armed Forces of the Philippines (AFP). 
This law provided, among others, for an automatic adjustment of the 
retirement pay to the prevailing scale of base pay of military personnel in the 
active service. In other words, the rate of pension will be computed based not on 
the rate of his base pay when the soldier retired but on the current rate of base 
pay as received by those in the active service. 
This adjustment however has caused tremendous pressure on the 
government's annual budget. Arrears in retirees' pensions have become 
common and the government is hard-pressed to look for a viable solution. 
The proposed bill is one of the measures aimed to, so to speak, stop the 
bleeding by removing the automatic adjustment provision. 
In view of the foregoing, passage of this bill is earnestly sought. 
RODOLFO GUIAZON 
Senator 
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$,%::~,.~ .ri- ~1H6, cfmE 
FOURTEENTH CONGRESS OF THE REPUBLIC 
First Regular Session 
) 
,iijF,i 30 Is 3 :37 
S E N A T E  
) 
OF THE PHILIPPINES 
) 
/' 
AN ACT 
FURTHER AMENDING PRESIDENTIAL DECREE NO. 1638, AS AMENDED, 
OTHERWISE 
KNOWN AS 
"ESTABLISHING A 
NEW 
SYSTEM 
OF 
RETIREMENT AND SEPARATION FOR MILITARY PERSONNEL OF THE 
ARMED FORCES OF THE PHILIPPINES AND FOR OTHER PURPOSES." 
Be it enacfed by fhe Senate and House of Representatives of the 
Philippines in Congress assembled: 
SECTION ONE. Section 17 under Title V of Presidential Decree No. 1638 
as amended is hereby further amended to read as follows: 
"SECTION 17. 
When an officer or enlisted man is 
retired from the Armed Forces of the Philippines under the 
provisions of this Decree, he shall, at his option, receive a gratuity 
equivalent to one (1) month of base and longevity pay of the grade 
next higher than the permanent grade last held for every year of 
service payable in one (1) lump sum or a monthly retirement pay 
equivalent to two and one-half percent (2 %%) for each year of 
active service rendered, but not exceeding eighty-five percent 
(85%) of the monthly base and longevity pay of the grade next 
higher than the permanent grade last held: Provided, That an 
officer retired under Section 11 or 12 shall be entitled to benefits 
computed on the basis of the base and longevity pay of the 
permanent grade last held; [Provided, further, That such retirement 
pay shall be subject to adjustment on the prevailing scale of base 
pay of military personnel in the active service;] 
Provided, 
furthermore, That when he retires, he shall be entitled, at his option, 
to receive in advance and in lump sum his annual retirement pay 
for the first three (3) years and thereafter receive his annual 
retirement pay payable in equal monthly installment as they accrue: 
Provided, finally, That If he dies within the three-year period 
following his retirement and is survived by beneficiaries as defined 
in his Decree, the latter shall only receive the derivative benefits 
thereunder starting the first month after the aforecited three-year 
period. 
Nothing in this Section shall be construed as authorizing 
adjustment of pay, or payment of any differential in retirement pay 
to officers and enlisted men who are already retired prior to the 
approval of this Decree as a result of increases in salary of those in 
the active duty may have their retirement pension adjusted based 
on the rank they hold and on the prevailing pay of military 
personnel in the active service, at the time of the termination of 
their recall to active duty." 
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SEC. 2. Repealing Clause. - All other laws, rules, regulations, orders, 
circulars and memoranda inconsistent with this Act are hereby repealed or 
modified accordingly. 
SEC. 3. Effecfivify. - This Act shall take effect immediately upon 
approval. 
Approved, 
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