Some fireworks can be expected tomorrow inside and outside the national affairs conference on pension reform, but a lasting solution to the problems facing the nation’s 13 pension funds is not. The pension plans are in need of too much repair for that.
However, the potential for crucial change is there.
It has been clear for years that substantive overhauls were needed to reflect the changes in the nation’s finances and demographics, including a low birth rate and rapidly graying society, as well as the need to balance the retirement age and pension plans between the public and private sectors.
Alarms have repeatedly been raised about the imminent bankruptcy of one or more of the pension funds, with patchwork bandages applied to keep them limping along, while efforts to abolish the political footballs that are the 18 percent preferential savings rate for retired public-sector employees and the vast gap between public/private sector retirement rules and plans have been demonized as class, ethnic or political warfare.
All too often political considerations trumped economics and common sense.
A piecemeal repair approach is no longer feasible, yet it does not bode well that a meeting on such a crucial topic was downsized from the original two-day plan. Nor is it a good sign that the government’s draft pension reform plan was released just three days before the conference, even though Vice President Chen Chien-jen (陳建仁) stressed that the plan was drafted after 20 committee meetings, four regional forums and efforts to solicit public opinion.
However, the reluctance of the Chinese Nationalist Party (KMT), the New Party and the Taiwan Solidarity Union to send representatives to tomorrow’s conference will not help efforts, but simply reduce the session to politics as usual.
Any reforms are bound to be painful because current pension systems are both badly outdated and poorly funded, but everyone is going to have to work together to achieve the needed changes, not just try to protect their vested interests. Everyone will have to make concessions.
For example, complaints about the impact that raising the retirement age will have on middle-aged workers who might have been planning to retire before turning 65 should be tempered by the knowledge that lower retirement ages were set when life expectancy was much lower and that none of the pension plans will be able to fund decades of retirement for them unless substantive changes are made.
Young people who fear that job or promotion opportunities could be affected by more older people remaining in the labor force should consider how these older workers will continue to pay into pension systems, reducing the burden on the young to fund plans that now appear unlikely to survive until they will be able to use them.
Complaints by retired civil servants about cuts to their benefits, especially the 18 percent preferential interest rate, should be tempered with recognition that they have profited for years from a KMT-rigged system that has been a massive drain on the national budget for decades and is crippling the Treasury.
That 18 percent interest rate was introduced in 1960 as an inducement for people to work for the government, with the government making up the gap between the average interest rate offered by banks and the 18 percent rate. The KMT long protected it as a vote-winning tactic.
The government’s plan for eliminating that 18 percent rate guarantee — through two staged options — is probably the best idea that has been presented in a long time, and the most feasible.
Even though the need for action on the pension systems is crucial, it must be well thought out action. Otherwise, Taiwan will remain trapped in an endless cycle of talk and shoddy patchwork.
When it became clear that the world was entering a new era with a radical change in the US’ global stance in US President Donald Trump’s second term, many in Taiwan were concerned about what this meant for the nation’s defense against China. Instability and disruption are dangerous. Chaos introduces unknowns. There was a sense that the Chinese Nationalist Party (KMT) might have a point with its tendency not to trust the US. The world order is certainly changing, but concerns about the implications for Taiwan of this disruption left many blind to how the same forces might also weaken
As the new year dawns, Taiwan faces a range of external uncertainties that could impact the safety and prosperity of its people and reverberate in its politics. Here are a few key questions that could spill over into Taiwan in the year ahead. WILL THE AI BUBBLE POP? The global AI boom supported Taiwan’s significant economic expansion in 2025. Taiwan’s economy grew over 7 percent and set records for exports, imports, and trade surplus. There is a brewing debate among investors about whether the AI boom will carry forward into 2026. Skeptics warn that AI-led global equity markets are overvalued and overleveraged
Japanese Prime Minister Sanae Takaichi on Monday announced that she would dissolve parliament on Friday. Although the snap election on Feb. 8 might appear to be a domestic affair, it would have real implications for Taiwan and regional security. Whether the Takaichi-led coalition can advance a stronger security policy lies in not just gaining enough seats in parliament to pass legislation, but also in a public mandate to push forward reforms to upgrade the Japanese military. As one of Taiwan’s closest neighbors, a boost in Japan’s defense capabilities would serve as a strong deterrent to China in acting unilaterally in the
Taiwan last week finally reached a trade agreement with the US, reducing tariffs on Taiwanese goods to 15 percent, without stacking them on existing levies, from the 20 percent rate announced by US President Donald Trump’s administration in August last year. Taiwan also became the first country to secure most-favored-nation treatment for semiconductor and related suppliers under Section 232 of the US Trade Expansion Act. In return, Taiwanese chipmakers, electronics manufacturing service providers and other technology companies would invest US$250 billion in the US, while the government would provide credit guarantees of up to US$250 billion to support Taiwanese firms
RSS