Levels of pensions
There is a lot of talk about how the pensions of military personnel, civil servants and public-school teachers will end up wrecking the nation’s finances, but what is really going on? To put it simply, government employees can be divided into three categories, with 1995 as the defining year.
The first category consists of those who retired before 1995. These people are entirely covered by the old pension system, under which retirees are paid a preferential interest rate of 18 percent on a portion of their savings. This 18 percent plan was instituted by the Ministry of Civil Service and the Ministry of Finance in 1960 in view of a situation where civil servants earned low salaries and the national treasury was rather short of money. It was aimed at encouraging civil servants to receive their pensions in monthly payments in the hope that they would deposit their pension contributions at the Bank of Taiwan so that the treasury could have a bit more money to use as needed.
Later on, the Ministry of National Defense and the Ministry of Education joined in, giving rise to the collective interest group of “military personnel, civil servants and public-school teachers.”
Most people in this first category are now in their 70s and 80s. Considering the low salaries they used to earn, the 18 percent interest paid on part of their savings does not amount to much, so the controversy does not arise from people in this category.
The second category consists of those who started working after 1995, who are not covered by the 18 percent plan at all. Only the system that came into force in 1995 applies to them. These are young and middle-aged people who are now in their 40s or younger, have been in their jobs for about 20 years and are not yet nearing retirement. These people might end up not even receiving their pensions, despite having paid in all their pension contributions. Nevertheless, through no fault of their own, they have also become the targets of abuse and slander.
The third category consists of those whose working lives span the periods before and after the watershed year of 1995. This is where the problem lies, because the years they worked before 1995 are covered by the 18 percent plan, while the years after 1995 come under the new system, and the principal on which the 18 percent interest rate is paid increased as their salaries grew. These people are covered by both the old and new systems, and rumor has it that their pensions are or would be even higher than their pre-retirement salaries. However, this is only true for some of these people.
Why only some of them? Because we have to consider the relative proportions of their working years that are covered by the old and new systems. Those who worked many years under the old system and only a few years under the new one are in a similar situation to those in the first category, while those who only worked a few years under the old system and more years under the new one are akin to those in the second category. When it comes to those who worked for about the same number of years before and after the changeover, there is considerable truth to the high-pensions rumor. The people in question are probably around 60 years old, and there are quite a lot of them.
The nub of the problem lies with this third category of state employees. If the pension system is to be reformed, the reforms must deal with this category, and that is why military personnel, civil servants and public-school teachers who are still working tend to support reforms. They are not to blame for the third category of state employees being the ones who occupy senior positions and wield the most power and influence.
The third category are thus in charge of pension reforms, and of course they would do their best to protect their own interests. Whether the reforms should be retroactive and the view that they should not be targeted at specific groups have become the key questions.
If reforms are made retroactively, they might harm the interests of the first category, who used to be quite poor. If, on the other hand, they are not retroactive, they are sure to sacrifice the interests of the second category, who are still working, so that the entire burden of higher contributions, smaller payouts and delayed retirement will fall on the shoulders of the middle-aged and younger generations.
If only the surface wounds are treated, those in the third category would say that they are being targeted. The outcome would cause confrontation not only between professions — military personnel, civil servants and public-school teachers versus other professions — but also between different generations of military personnel, civil servants and teachers.
In view of future conditions, pension reform is a necessary evil that cannot satisfy everyone, and the majority of state employees are prepared to accept the inevitable. However, they hope that certain people whose voices are easily heard would desist from putting state employees into disrepute, depriving them of their dignity and putting them in the pillory by misleading the public. What state employees really desire is the fair and just treatment that is due to everyone.
Kuei Chu-ching
Tainan
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