TAIPEI (REUTERS) - Taiwan will inject NT$20 billion (S$903.4 million) a year into labour pensions starting in 2018 as part of broader reforms to ensure that workers’ pensions remain financially solvent.
Vice President Chen Chien-jen told a news conference on Thursday (Jan 19) that pension reforms for teachers, civil servants and non-government employees will help delay a default in payments to retirees by a decade.
Pensions for civil servants could default by 2030, teachers in 2031 and other workers in 2048, government data shows, if Taiwan’s pension system is not reformed due to years of under-funded liabilities.
Proposed reform measures are estimated to affect 600,000 civil servants and 10 million private sector workers. Among the measures is the phasing out of a long-standing 18-per-cent preferential interest rate for retired civil servants.
Reform plans for military pensions, which could default as early as 2020, will be discussed after the Lunar New Year holiday, Lin Wan-yi, deputy chief of the National Pension Reform Committee, told Reuters on the sidelines of the briefing.
The government has said an urgent overhaul of the pension system is needed as large payouts are no longer sustainable for the export-reliant economy, with contributions crimped by slower economic growth since the 1990s and a rapidly aging population.
Successfully reforming the system will be crucial for President Tsai Ing-wen, whose popularity has hit an all-time low since taking office last May.
She says reforms are “urgent”given limited national and social resources and wants to see pension reform bills passed by the legislature this spring.
The reform plan has triggered protests from thousands in the public sector over the last few months.
Another such protest is set for Sunday outside the Presidential Office, when the government will hold a key meeting to discuss the plan.
Chen encouraged those intending to protest to let their representatives come forward instead. “It has been pretty cold outside,” said the vice president, in reference to the weather.
“We urge them to have their representatives participate in the meeting to speak on their behalf.”
The unease over pension reforms cuts across several sectors. Under-funded liabilities of public and labour sector pensions were expected to hit a record NT$18 trillion in 2016, nine times the government’s annual budget expenditure and a big jump from NT$12 trillion a decade ago.