The Cabinet and the Examination Yuan on Thursday announced that they had approved draft bills to revamp pension schemes for civil servants and public school teachers.
The Legislative Yuan must still approve the drafts — the most recent step in the nation’s years-long effort to reform its debt-ridden public pension system — which would only affect those who take up positions after July 1 next year.
In contrast to the current system, the draft bills would require public workers to make contributions into individual accounts, rather than a common pension fund, with a defined level of contributions, rather than benefits.
Photo: Lee Hsin-fang, Taipei Times
Monthly contributions would be set at 15 percent of a person’s insured salary, of which 35 percent would come from the individual and 65 percent from the government.
For example, a person earning a monthly salary of NT$40,000 would have a monthly contribution of NT$6,000, of which they would pay NT$2,100 and the government would pay NT$3,900.
People could also choose to save up to double their required personal contribution, but it would not be matched by the government.
The reforms would also give public workers more control over their pensions by allowing them to choose from a range of investment plans offered by the Public Service Pension Fund Management Board, based on their level of risk tolerance, the Cabinet said.
Changing from defined pension benefits to defined contributions is necessary for the stability of the public pension system, Cabinet spokesman Lo Ping-cheng (羅秉成) said.
As the changes would result in less money going into the pension fund from workers covered by the new scheme, the government would annually allocate money to fill the gap, so the benefits of current public workers and retirees would not be affected, the Cabinet said.
Notably, the proposal’s mandatory contribution of 15 percent is more than double the 6 percent contribution required under the Labor Pension System, which covers workers in the private sector.
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