Debt-ridden military pension fund to close

Manila: The debt-ridden military pension fund will close down by the end of this year after years of abuse by its military managers who used soldiers' money like a personal kitty, Defence Secretary Avelino Cruz said on Saturday.

Cruz said the bankrupt Armed Forces of the Philippines' Retirement and Separation Benefit System (RSBS) will be closed on December 31.

Payments due to soldiers will be taken over by the administration of President Gloria Arroyo until a new pension fund system has been set up by law, he added.

This relieves the 115,000 members and their families from worrying about where the money due to them will come from, said Cruz.

But Cruz added that a lot of questions will have to be answered by former officers who ran the pension fund about what happened to its various investments that dried up the fund.

He said the missing investments would have grown to at least 20 billion pesos by today if used more judiciously. There is also a need to clarify what will happen to the cases filed by the Ombudsman against generals and other military officers who were involved in wrongdoings in operating the fund.

Former Defence Secretary Orlando Mercado first exposed the anomaly at RSBS in 1998 but experts believe there was already undetected misuse of the RSBS funds soon after President Ferdinand Marcos created it in 1974.

Non-existent

Mercado discovered that more than 70 per cent of the fund had been placed by its managers in grossly overpriced real estate property - some of these even non-existent or downright scams.

When real estate prices got stuck in the mid-'90s and plummeted as a result of the Asian financial crisis that started in Thailand in 1997, the RSBS became seriously strapped for cash.

Before Marcos created the fund in 1974, the military pension fund was part of the Government Services and Insurance System, which operates the pension fund for all government employees.