Former Chinese Nationalist Party (KMT) lawmaker Sun Ta-chien (孫大千) yesterday highlighted four “major flaws” in the Democratic Progressive Party (DPP) administration’s pension reform policies, which he said could spell disaster for the nation.
The pension reform — scheduled to take effect on July 1 — relies too heavily on cutting payouts and neglects the need to identify new funding sources, inversing the proper order of tasks, Sun said on Facebook.
Cutting payouts is the most convenient option for stabilizing a pension system, but it is the one that could induce the greatest fallout, he said.
The administration’s reforms focus on expediency, rather than formulating measures to diversify funding sources for the pension system by, for example, adjusting fund investments, which use government spending and salary contributions, he said.
The DPP has been slow to devise methods to boost the rates of return of pension fund investments, which is fundamental to enlarging the funds, Sun added.
The administration should establish a public foundation entrusted with setting up a “national sovereignty fund” that would integrate four major pension funds, he said, adding that the administration could follow investment strategies adopted by other nations and relax investment rules, which would likely boost the rates of return.
The rates of return — currently 3 to 5 percent — should be 5 percent or more, which would keep the pension system solvent in the short term, Sun said.
Resolving the nation’s low birth rate, which has contributed to a shortfall in contributions, is also crucial to increasing the pension funds, he said, adding that it is far-fetched to assume that current fund sizes or the administration’s policies would be able to resolve the pension problem.
The DPP’s pension reform platform is faulty and could upset demand in the domestic market and cause an economic downturn, making people more reluctant to have children, which would aggravate fund shortfalls, Sun added.
Amendments pushed through the legislature by the DPP to keep the pension system from going bankrupt are retroactive, meaning that they would affect workers and pensioners alike, which goes against the principle of legitimate expectation, he said.
Comparing the government to a company, Sun said that military personnel, public-school teachers and civil servants are similar to company employees.
The government would not tolerate a company reducing monthly contributions to its employees’ pension plans just because the company is facing a financial crisis, Sun said, adding that the administration should not have a double standard that allows itself to cut people’s pensions.
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