Money saved by eliminating preferential savings accounts for government retirees should be put back into pension funds, teachers’ union officials said yesterday, adding that government reforms would fail to guarantee pension fund sustainability.
“Only the central government’s contribution to budgetary funds for the 18 percent preferential interest accounts would be injected back into pension funds, but funds raised from local government budgets are not included,” National Federation of Teachers’ Unions president Chang Hsu-cheng (張旭政) said, adding that according to draft reform plans, local governments would be allowed to keep money saved by eliminating “compensatory” pension payments.
The compensatory payments are given to retired government workers hired before the implementation of pension reforms in 1995, which limited their access to the preferential savings accounts.
Civil servants and teachers hired after the reforms lost all access to the accounts, which are to be eliminated over six years, according to the reform plans.
“Local governments should not be allowed to take advantage of pension reform to use previously allocated money for their own projects — that is not reform, that is pillaging,” Chang said, adding that he estimates the funds would reach about NT$25 billion (US$812 million) per year.
He also called for parameters for retirees to be subject to the same adjustments proposed for future retirees, including reductions in the average salary base used to calculate benefits, as well as salary “replacement ratios.”
Coupled with reforms to increase pension funds’ rates of return by opening them up to professional financial management, the additional cuts and a requirement that savings be put back into the funds should be enough to cover the shortfall, he said.
He declined to comment on proposals by an association representing young civil servants to save further funds by increasing the pace of reforms.
Government proposals would postpone, but not forestall, the funds from going bankrupt, he said.
Union deputy secretary-general Luo De-shui (羅德水) welcomed a statement by Minister Without Portfolio Lin Wan-i (林萬億) on Wednesday that separate pension funds would be established with the money from proposed increases in premiums, while calling for the new funds to continue to function as entitlements providing guaranteed benefits.
“Since people can make private investments separately, the function of government benefits should be to provide a guaranteed minimum,” Chang said, adding that new pension funds should continue to pool contributions rather than being kept in individual private accounts.
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