Wed, Oct 19, 2016 - Page 8 News List

EDITORIAL: Pension parity, at last

After the clamor of the past six months, the Pension Reform Committee has finally come to a consensus: The retirement age of state employees — military personnel, civil servants and public-school teachers — is to be extended to 65, bringing it in line with that of private-sector workers. Although the committee has yet to iron out the details and several teachers’ groups are already raising objections, the decision is the right one.

This agreement brings some form of unity to the retirement age across the public and private sectors. At present, private-sector workers can only claim their full pensions on reaching 65 and, although they can retire as early as 60, they forfeit 4 percent of their pension for every year they bring their retirement forward. If they retire at 60, they receive only 80 percent of their full pensions.

There is a global trend toward retiring later. The current retirement system for public-sector employees is an unsustainable burden for taxpayers and is unfair on the rest of society. This is because of its excessively high income replacement rates (IRR) — about 95 percent on average — and the early retirement ages, which mean that pensions might be paid for 25 to 30 years, placing a strain on state finances.

The earlier state-employee pension system was based on the combined number of years worked plus one’s age — if that number was greater than 75 a person could retire. Given a university leaving age of 23, a worker could retire at about 50. Later, this number was increased to 85, so if someone worked for 25 years it would be possible to retire at 60. In other words, you could also retire as early as 55, as long as you had worked for 30 years. This is set to be increased to 90.

A quick calculation of the state-employee pension system, with its current IRR, shows how generous and unreasonable it is. On average, a public-school teacher retires at 53 with a salary of NT$68,000 (US$2,147). A civil servant retires, on average, at 55.7, with a salary of NT$56,000, while military personnel can retire as early as 44 with average salaries of NT$49,000.

If the retirement age of teachers was put back 12 years, assuming an average salary of NT$68,000, the government could save NT$816,000 per year per teacher, or NT$9.79 million per teacher over the course of the 12 years. This would constitute savings of several hundred billion New Taiwan dollars for the government every year, a not-inconsiderable figure.

The reason groups give for opposing the pushing back of teachers’ retirement age is the difficulties older teachers face. Students are not keen on having older teachers, and the widening generation gap leaves such teachers out of touch with educational needs. If you allow this argument to stand, then surely it is even more difficult for an aging physical worker: Should blue-collar workers not be allowed to take early retirement too?

These teachers’ groups are just trying to protect their vested interests. As long as a teacher can maintain their enthusiasm for teaching, and is willing to keep up with new developments and social changes, then the longer they teach, the better they become precisely because of their experience.

If a teacher or civil servant wants to retire early, either because this is what they want, or they feel that they are too old to continue, then they can take a hit on their pension, just like other workers are expected to do.

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