Taiwan passes Bill to cut pension payouts

Tsai says money saved will fund system for 30 years; move sparked protests in past year

Taiwan's generous payouts for public pensioners will be trimmed from July next year, in a move the government said will prevent the national pension fund from going bust amid slow economic growth.

The island's lawmakers passed a package of reforms yesterday that will save NT$1.4 trillion (S$63 billion ) to be used to fund the national pension system and keep it afloat.

The unpopular move, which affects civil servants, public school teachers and political appointees, has led to protests in the past year.

President Tsai Ing-wen said after the reforms were passed that the money saved will keep the system going for the next 30 years.

If nothing was done, pensions for civil servants could default by 2030 and those for public school teachers, by 2031, government data showed. The situation is even more dire for retired military personnel, whose pensions could go bankrupt by 2020.

The new changes, which kick in next July, include:

  • Reducing monthly payouts for teachers and civil servants, who currently draw up to 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 on savings for retired civil servants and teachers by 2021; and
  • Raising the minimum retirement age for teachers from 55 to 58 and for civil servants from 55 to 60.

One of Ms Tsai's campaign promises was to overhaul the national pension system, something past presidents had failed to do.

The passage of the Bill followed a year-long wrangle between the government and unhappy public pensioners. More than 20 meetings and forums were held to canvass the views of scholars, government officials and representatives from different occupations.

Thanking lawmakers and Taiwanese who offered their views, Ms Tsai said in a speech that reforming the pension system was difficult.

"We were hit by all kinds of pressures too from all directions. But we held on," she said.

While Ms Tsai said she would take responsibility for any backlash over the reforms, she also urged the people to remain calm.

But retired teacher Wu Shih-hsin, 66, is not appeased, saying: "The government has belittled us and robbed us of our nest egg. How can we be happy about that?"

National Civil Servant Association chairman Harry Lee Lai-hsi, a strident critic, said: "We will continue to fight the reforms and protect our nest egg. We will make our voices heard in the elections."

An even more difficult battle looms when Ms Tsai turns her attention to overhauling pensions for retired military personnel, whose payouts are nearly four to five times the NT$22,000 average starting salary of many university graduates. They also form a powerful faction in many political parties. A wrong move may cost her Democratic Progressive Party dear in next year's mayoral and local elections.

A version of this article appeared in the print edition of The Straits Times on July 01, 2017, with the headline 'Taiwan passes Bill to cut pension payouts'. Print Edition | Subscribe