The Democratic Progressive Party (DPP) yesterday called on the government to drastically cut pensions awarded to retired civil servants to bring them more into line with those of current public sector employees, a move the government appeared unwilling to make.
DPP Chairperson Tsai Ing-wen (蔡英文) said the importance of the matter was highlighted by a recent media outcry over hefty perks given to retired senior officials — including her own monthly bonus of NT$62,800.
“The problem should not be over how much perks people receive, or who does and who doesn’t receive it. The problem lies in whether this system is fair,” said Tsai in her first major policy recommendation on the issue.
Tsai and DPP lawmakers have called on the government to lower the 18 percent annual interest rate paid to retired public servants as part of a preferential savings plan and place limits on the allowed amount of deposits.
The party also hopes to see the overall pension, including bonuses, given to retired civil servants shrink to a smaller proportion of their pre-retirement salary. The lower figure would more accurately reflect that given to retired civil servants in other countries, Tsai said.
At present, the pension of retired civil servants is capped at 95 percent of salary.
Tsai said this should be revised to about 80 percent, a more “reasonable” figure that was also modeled more closely on private sector benefits, she said.
Coming off previous statements to cut the 18 percent preferential interest rate in half, DPP lawmakers said the percentage should be 5 percent over the long-term savings rate offered by the Bank of Taiwan.
As of yesterday, this would work out to about 6.3 percent annually.
Although the DPP called the reforms “pressing” and said the matter should be addressed by the government or the legislature as soon as it resumes next month, Tsai said the proposals were open for discussion.
“If they [the government] truly have a desire for reform, of course the DPP will be willing to sit down and talk,” she said. “We hope [talks] can take place as soon as possible so that the revisions that can be carried out right away are implemented immediately.”
Tsai said she was open to the idea of a temporary legislative session to work on the reform package.
Despite the DPP’s call for reform and criticism from labor groups, the government yesterday said it would maintain the preferential interest rate of 18 percent in order to maintain retirement income at 95 percent of salary.
Examination Yuan Secretary-General Hwang Yea-banng (黃雅榜) said the preferential interest rate of 18 percent would remain in place because 95 percent is a “reasonable” income replacement ratio.
Under the pension scheme for government employees, members of the service, teachers, and civil servants are entitled to deposit a sum of money based on their pension and number of years in service prior to 1995 in an account that earns an interest rate of 18 percent subsidized by the government.
Aside from the need to comply with the principle of legitimate expectations, the main reason why the preferential rate should be maintained at 18 percent is that civil servants’ retirement income is composed not only of pensions, but also old-age benefits provided by the insurance systems for civil servants, teachers and members of the service, Hwang said.
One should not compare the income replacement rate in Taiwan — where it is mandatory for government employees to join the plan — with that in other countries, which accounts for about 50 percent of salary, Hwang said.
With the two-pillar pension system, part of the government employees’ retirement income is derived from their premium fees, he said.
Lu Ming-tai (呂明泰), director of the Department of Retirement and Survivor Relief at the Ministry of Civil Service, said the replacement ratio for public servants in Taiwan was lower than the 102 percent for the labor sector.
The argument, made by some labor organizations, that the ratio for the labor sector is 46 percent is incorrect, as it does not factor in the pension provided by the labor insurance system, Lu said.
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