The government spends NT$80 billion (US$2.46 billion) per year to subsidize preferential interest rates for the retirement accounts of some public employees, Minister of Civil Service Chang Che-shen (張哲琛) said, adding that reforms are needed.
Chang said the 18 percent rate paid on parts of the special savings accounts of retired civil servants, military personnel and public-school teachers dwarfs the standard interest rate of about 1 percent most people receive.
The difference between the interest rates is paid for by the government.
“No matter who takes power, they will have to face the issue of pension reform,” Chang said on the sidelines of a legislative hearing on Monday, referring to the presidential and legislative elections set for Jan. 16 next year.
He said that pension reform is the consensus of society and the consensus of the governing Chinese Nationalist Party (KMT) and the Democratic Progressive Party.
As of the end of 2013, 440,000 retirees had total savings of NT$458 billion that benefited from the 18 percent preferential interest rate, costing the government NT$81.56 billion in subsidies, or about NT$3,500 per capita.
The system is bound to cost the government a substantial amount in the near and medium-term future, as people who were public employees before 1995 are eligible to receive the subsidy.
A new pension system launched in 1995 canceled the benefit for civil servants, military personnel and public school teachers hired in 1995 or later.
An estimated 420,000 retired public employees enjoy the benefit today, and about 400,000 public employees who are still working are also eligible for the preferential interest rates once they retire.
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