Thu, Jan 31, 2013 - Page 3 News List

PENSION REFORM: DPP unveils its plan for reform of pension system

ALTERNATE PLAN:The party proposes lowering income replacement from 80-90% to 60-70% and a retirement age of 65, in line with private-sector retirees

By Chris Wang  /  Staff reporter

Lin Wan-i, executive director of the Democratic Progressive Party’s (DPP) think tank, left, is accompanied by DPP Chairman Su Tseng-chang yesterday as he introduces the party’s pension reform proposal at a press conference in Taipei.

Photo: Lo Pei-der, Taipei Times

The Democratic Progressive Party (DPP) yesterday unveiled its pension reform proposal with a focus on lowering retirement payments to civil servants, public school teachers and military personnel, as the administration of President Ma Ying-jeou (馬英九) announced its own proposal on the same day.

Highlighting social solidarity, the DPP proposal aims to bridge the gaps between various social groups and make pension programs sustainable for future generations while benefiting employers and employees, DPP Chairman Su Tseng-chang (蘇貞昌) told a press conference.

As public discussions have centered on differences in the way public-sector workers and private-sector workers fare under the nation’s pension programs, the proposal addresses issues of fairness and financial sustainability, executive director of the DPP’s think tank Lin Wan-i (林萬億) said.

The DPP released a document featuring a table listing the differences between its proposal and the government’s plan, and again called for a national affairs conference to be held so that all involved parties could discuss potential reforms.

The DPP’s proposal recommended lowering the income replacement ratio for civil servants, public-school teachers and military personnel from the current 80 percent to 90 percent, to between 60 percent and 70 percent, thus decreasing the gap between them and private-sector employees, who currently have an income replacement ratio of between 50 percent and 60 percent.

Public sector workers’ income from a 18 percent preferential interest rate on their savings should also be included in their income replacement calculations, and the basis for their retirement payments should be 1.7 times their average basic salary over a 10-year period, the proposal said.

Currently, retirement payment calculations for public-sector employees are based on two times their basic salary during the last month of their working career.

The DPP also called for all government employees, except military personnel, to begin receiving retirement payments at the age of 65 — the same age as private-sector workers — by 2027 because some government employees retire at about 50, which increases the government’s financial burden.

The proposal also recommends a uniform premium allocation ratio, with employers responsible for 60 percent and employees for 40 percent, as opposed to the different ratios currently applied under the nation’s various pension programs.

In other areas, the proposal recommended adjusting retirement payments if changes in the Consumer Price Index exceed 5 percent, as well as a review of the entire system every 20 years, said Lin, who is the primary author of the proposal.

The Ma administration’s plan to review the system every five years could cause social instability, Lin said.

Under the DPP’s recommendation, the premium rate of labor insurance funds, which currently stands at 8 percent, should be increased annually and reach 16.25 percent within 30 years, which means workers would have to pay higher premiums in the future to prevent the funds from becoming bankrupt.

However, the current retirement payments for workers should be maintained until further calculations suggests otherwise, Lin said.

Lin said that the DPP proposal attempts to keep workers’ payments at their current level while the government’s plan, which recommended an eventual premium rate of 19.5 percent, would ask workers to pay higher premiums but receive smaller retirement payments.

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