On July 7, 2017, the day that pension reform began under then-president Tsai Ing-wen (蔡英文), Ketagalan Boulevard in Taipei was packed, as enraged military personnel, civil servants and teachers protested. However, actuaries at the Bureau of Labor Insurance quietly breathed sighs of relief, as the date that retirement funds were projected to go bankrupt had been delayed by at least eight years — from 2032 to sometime after 2040. The income replacement rate for retired public workers has since been reduced from 90 percent to 70 percent, while the labor insurance rate of 50 percent is expected to rise to about 60 percent by 2030. The reforms were not a cut, but a rescue of funds, fairness and the next generation.
The Chinese Nationalist Party (KMT) and the Taiwan People’s Party (TPP) are using their combined majority to push amendments to the Act Governing Civil Servants’ Retirement, Discharge and Pensions (公務人員退休資遣撫卹法) that would freeze income replacement rates and stipulate that if inflation rises 5 percent, pensions would automatically increase. The lawmakers who proposed the changes say that they would “restore dignity,” but actuaries warn it would be akin to planting a landmine. If passed, the amendments could increase expenditures by NT$300 billion to NT$500 billion (US$9.66 billion to US$16.11 billion) in one decade, reigniting the deficit woes. This is not only a budgetary issue, but intergenerational plunder.
Prior to Tsai’s reforms, some retired military personnel, civil servants and teachers received pensions that exceeded their salaries while they were in service, while ordinary workers received less than NT$20,000 per month from the Labor Pension Fund. After the reforms, retired public workers receive an average monthly pension of about NT$70,000, while labor pension payouts have been gradually increasing. Progress might be slow, but it is headed in the right direction. If the campaign to halt pension cuts succeeds, it would mean that political blocs have overruled expertise and ballots have torn apart consensus.
The opposition camp’s call to offset inflation is not completely wrong. Official data show that the consumer price index rose nearly 8 percent from 2022 to last year, and retirees have felt the financial impact. However, the solution should not be to unilaterally increase benefits for military personnel, civil servants and teachers — it should be a comprehensive adjustment. Labor pension recipients still get less than NT$18,000 per month on average. The government should establish a NT$30,000 minimum pension floor before proportionally compensating public-sector retirees — that would be true fairness. Otherwise, taking care of one generation would burden three. Who would pay for education, childcare and housing for young people?
Pension reform is about ending special privileges, not punishing public service. The contributions made by military personnel, civil servants and teachers deserve respect, but that respect should not be limitless. The core intent of pension reform should lie in ensuring that pensions are attainable, lasting and fair. Halting incremental pension cuts would not only create a fiscal crisis, but a moral one as well. It would send a message to young people: The taxes you pay are subsidizing the older generation, while your future is being traded by politicians in exchange for votes. When pension funds go bankrupt in the 2040s, who would take responsibility for the generation reaching retirement age then?
The Legislative Yuan should immediately release the latest actuarial report. Let the numbers speak for themselves and allow the public to decide. Only a society that dares to take responsibility for its future is truly worthy of being called a democracy.
Hsiao Hsi-huei is a freelance writer.
Translated by Kyra Gustavsen
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