Vice Premier Jiang Yi-hua (江宜樺) yesterday tendered a closely watched reform proposal at a meeting of the Chinese Nationalist Party (KMT) legislative caucus, amid heated debate over pension reform for civil servants and salaried workers to ease the government’s finances.
Accompanied by Minister of Civil Service Chang Che-shen (張哲琛), Executive Yuan Secretary-General Steven Chen (陳士魁) and Council of Labor Affairs Deputy Minister Pan Shih-wei (潘世偉), Jiang tabled the proposal that could most likely set a path for the government’s future pension reform.
President Ma Ying-jeou (馬英九), who doubles as KMT chairman, is scheduled to explain the draft proposal to the public tomorrow, before the Cabinet’s pension reform task force hold another round of deliberations on the plan.
A finalized proposal is expected to begin the legislative process in April at the earliest.
According to sources, the government is planning to enshrine in the law that it allocate money to deficits in the cash-strapped Labor Pension Fund on an annual basis and assume “ultimate responsibility” for pension payments.
The Income Replacement Rate (IRR) for the pension fund is likely to remain unchanged at its current 1.55 percent, the source said.
In addition, gradual increases are expected to be made to the number of months of an insured worker’s income used to calculate their “average monthly insurance salary,” which could affect the amount of old-age benefits they receive after retirement.
Average monthly insurance salary is the average of an insured person’s highest 60 months (five years) of insurance payments while covered.
As for the civil servant retirement system, the government is likely to adopt the “rule of 90” system in 2016, in which a civil servant can only retire if their age and years in service add up to 90. For example, a civil servant who has reached the age of 60 and has accumulated 30 years of service is eligible for retirement.
Currently, civil servants can retire if their age and years in service add up to 85.
The source said that an IRR of less than 80 percent could be imposed on civil servants, military personnel and public school teachers who retire, while the calculation base for their pension payments could also be adjusted.
As for the contentious preferential 18 percent interest rate on savings accounts held by retired civil servants, the government is mulling replacing the mechanism with a floating interest mechanism with a maximum interest rate of 9 percent, the source said.