The 18 percent preferential savings interest rate was originally intended to give those who choose to receive their retirement pension as a lump sum a monthly dividend to serve as a retirement payment. Therefore, those who choose a monthly payment should not also enjoy the preferential savings interest rate. However, they do and this is unimaginably generous. Using the highest-ranking mid-level civil servant ranking as an example, adding the interest from the NT$1,643,940 quota on which retired civil servants enjoy the 18 percent preferential savings rate, they get an additional NT$24,659, tax free, on top of their monthly pension payment of NT$76,205, thus receiving a total of NT$100,864. That’s a substitution rate of 144 percent.
The top officials setting up the new system did so to their own fraudulent purposes and a further reform in 2006 is also stirring up problems. At the time, the substitution rate had to be lowered and public servants therefore used a 12th of their basic salary, supplementary pay and year-end bonus together with an additional managerial supplement when calculating the substitution rate, thus seemingly lowering it.
This is how the new system is used to deceive lower-ranking officials and higher-ranking officials alike. It is a vicious piece of legislation and it is not very surprising that the Civil Servant insurance fund is about to go bankrupt.
Lin Cho-shui is a former Democratic Progressive Party legislator.
Translated by Perry Svensson