Taiwan President Ma Ying-jeou promises pensions safe for 30 years

Preferential interest rate to drop from 18 % to between 7 and 9 %

TAIPEI (Taiwan News) – President Ma Ying-jeou unveiled his government’s pension reform plans to the nation Wednesday, promising the system was safe for 30 years.
His news conference at the Presidential Office Building followed months of growing public fears about the eventual bankruptcy of the country’s social security and pension systems. Ma emphasized that thanks to his reforms, there should be no more worries.
He announced he would not draw the 18 percent preferential interest rate for retired civil servants himself once he retired. The rate, which is reserved for government employees who worked before July 1995, will be cut to 7 percent with the addition of a floating rate fixed by the Bank of Taiwan, but the total should not exceed 9 percent, reports said. The lowering of the rate will proceed gradually over the next four to five years.
Ma described how the ageing population and the low birth rate over the past 20 years resulted in citizens paying little, retiring early and receiving high benefits. There were insufficient funds and imbalances between socio-economic groups and generations, he said.
If he failed to push through reforms, the military pension fund would go bankrupt by 2019, the teachers’ and labor insurance systems by 2027 and the civil servants’ pension scheme by 2031, Ma said.
The president compared the endangered social security systems to the wagons on a train going through the mountains. “If we don’t find a bridge on time, this train will crash into a ravine after I leave office,” he said.
Ma described the plans unveiled Wednesday as signs of a new direction but not as the final version of the reforms. More negotiations and suggestions would follow before a more complete version could be presented to the Legislative Yuan for review in April, he said.
“Reform is gradual and cannot be put in place in one go, while it cannot please all the people,” he added.
“The pension system is not your pension or my pension, it is our pension, but it is also the pension of our children and grandchildren, and even more so, it is the pension that will not and cannot go bankrupt,” Ma said.
As leaked to the media over the past few days, labor insurance premiums will rise by 0.5 percent a year over 23 years from the current 8 percent until they reach 19.5 percent.
The calculation of pensions for civil servants would also no longer depend on the final salary earned before retirement, but on an average of the salary for the final 15 years of work, reports said.
Civil servants would also have to work five years longer before they could qualify to draw pensions, though the measure would not be implemented for certain categories including military and teachers at elementary and secondary schools, according to reports.
The opposition Democratic Progressive Party and labor organizations have already condemned the plans for being inadequate and too painful for workers.
A taskforce under the leadership of Vice Premier Jiang Yi-huah has been preparing the plans for the past two months with negotiations between Executive and Examination Yuan featuring at the center of the preparations.
The president said Jiang had attended 124 hearings attended by a total of 11,000 people, including academics and experts, business people and representatives of social groups. The mention sounded like a rebuttal of the DPP’s calls for a more transparent consultation process and for a National Affairs Conference.
Ma was accompanied at his news conference by Premier Sean Chen, Examination Yuan President John Kuan and Legislative Yuan Speaker Wang Jin-pyng.