Outcry in Taiwan as govt eyes pension reforms

Protesters at a rally to oppose the overhaul of pension funds for the military and civil service, outside the Presidential Office in Taipei, on Sunday. If nothing is done, pensions for retired military personnel could default in just three years by 2
Protesters at a rally to oppose the overhaul of pension funds for the military and civil service, outside the Presidential Office in Taipei, on Sunday. If nothing is done, pensions for retired military personnel could default in just three years by 2020 while that for civil servants could default by 2030.PHOTO: REUTERS

Pensioners upset even as most Taiwanese agree change needed

After months of consultations, the Taiwanese government has released proposals to reform the island's pension system, but these have quickly drawn resistance from those who stand to lose even as most say the changes are needed.

Unveiled last week after a series of public consultations and forums since last July, the proposals aim to ensure that pensions for the island's workers are sustainable.

If nothing is done, pensions for retired military personnel could default in just three years by 2020 while that for civil servants could default by 2030. Private-sector worker pensions could go bankrupt in 2048, government data shows.

The Taiwan government is eager to get parliamentary approval for the proposed Pension Reform Bill as early as March.

The key proposed changes, which could affect 600,000 civil servants and 10 million private sector workers, include:

•Boosting labour pension funds with annual government aid of NT$20 billion (S$905 million) starting next year;

•Reducing the monthly payouts for teachers and civil servants, who are drawing as much as 80 per cent to 100 per cent of their last-drawn salary before retirement, to 60 per cent;

•Phasing out a longstanding 18 per cent preferential interest rate for retired civil servants and;

•Increasing monthly contributions among civil servants and private sector workers by at least 6 per cent.

However, changes to the retired military personnel pension funds will be announced only next month. This is expected to be highly controversial as the payouts of military personnel are one of the largest among public pensioners.

Most people agreed that reforms were needed. A poll released this week by think-tank Taiwan Style Foundation close to the ruling Democratic Progressive Party (DPP), found that 65 per cent of respondents want pension reforms to be completed this year, with 63 per cent agreeing that President Tsai Ing-wen of the DPP has the resolve to push ahead with reforms.

But teachers, civil servants and military personnel, whose generous pension payouts will be cut under the proposed changes, have voiced their unhappiness.

On Sunday, tens of thousands of pensioners took their frustrations to the streets.

Retired Lieutenant-General Wu Sze-huai, 64, who left the army in 2011, said: "We want to tell the Tsai government that she cannot use reforms as an excuse to take away what rightfully belong to us. We won't be taken for granted."

The changes will cater to the needs of the majority and be fair to all workers, said National Taiwan University sociology expert Fu Tsung-hsi, who is on the panel tasked by Ms Tsai to think of ideas.

With a rapidly ageing population and a low fertility rate - 12.5 per cent of the population is older than 65, Taiwan's generous pension schemes are a growing strain.

Ms Tsai's pension reform plans will be the third attempt to overhaul the system, after attempts by former presidents Chen Shui-bian and Ma Ying-jeou.

Associate Professor Fu told The Straits Times: "Pensions affect so many different occupations so differences can be expected and ironed out through more discussions. But everyone agrees there is no better time but now to reform."

Economics professor Kenneth Lin of National Taiwan University said that savings from the proposed cuts or the NT$20 billion government aid may not go to those who are in need.

The proposed reforms are "half-hearted" and do not go far enough in ensuring that the pension funds remain financially solvent in the long run, he said.

"The government seems to be content with buying itself enough time to keep the funds going while it is in power.

"By not taking a more drastic approach to overhaul the system, it is kicking the can down the road for the next government to deal with it," he said.

A version of this article appeared in the print edition of The Straits Times on January 26, 2017, with the headline 'Outcry in Taiwan as govt eyes pension reforms'. Print Edition | Subscribe