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Yao vows to pass pension reform plan

Yao vows to pass pension reform plan

The Examination Yuan is determined to pass a controversial pension reform plan for government employees in the near future despite suggestions that certain Yuan members would try and shelve it, Yuan President Yao Chia-wen (姚嘉文) vowed on Friday.

A media report indicated last week that certain "pro-blue" Examination Yuan members had already made it clear they would try to postpone the review of the proposal as long as they could.

But Yao predicted the measure would pass at this Thursday's regularly scheduled members' meeting because most members understood the plan's importance in terms of promoting social justice and would ultimately back it. Yao's desire to pass the proposal, expressed in an interview with the Taiwan News on Friday, was bolstered by President Chen Shui-bian (陳水扁) when he reiterated the need for a series of reforms, including the pension program, in his New Year's message yesterday.

The reform plan would place a cap on the amount of benefits a retired government worker could receive, an attempt to ease the government's burden in supporting retired civil servants who are currently able to draw a higher level of compensation than that received when they worked.

Yao argued that the reform is a rational move at a time when government employees earn higher salaries and pensions than they used to 40 years ago when the current system was put in place.

In order to attract more intellectuals to serve in the government, military and education sectors, the Kuomintang government decided in 1960 to guarantee them preferential interest rates on their pensions deposited with the Bank of Taiwan to ensure comfortable retirements.

The interest rate was adjusted several times before settling at 18 percent in 1983, a rate that helped send civil servant retirement income above their salaries when they were active.

Many civil servants retiring after 30-year careers, for example, collect NT$59,029 monthly in combined pensions and 18 percent interest on pension savings under current rules, despite earning NT$51,740 on average in salary when they were active, according to the Ministry of Civil Service.

Receiving in retirement 114.09 percent of their active compensation far exceeds the 60-75 percent rate prevalent in western countries.

This "income replacement rate" could reach 130 percent for another group of government employees set to retire in a few years, the ministry added, pointing to the need for reform.

Offering 18-percent interest on savings has also proven increasingly costly to the government. It had to pay NT$58.8 billion in interest to finance the policy in 2004, compared to NT$18.8 billion in 1995, official statistics show.

But Yao insisted that, "the 18 percent interest rate is not the crux of the dispute," since the government recognized it had to tackle the problem's underlying causes.

"What we have paid great attention to over the past three years was exploring causes of and solutions to the abnormal 'income replacement rate,'" he said.

The plan's opponents contend that the president and his Democratic Progressive Party government proposed it with political motives in mind, pitting civil servants against private sector workers with lower retirement incomes.

They also accused authorities of betrayal in scaling back compensation promised to people who served the country for many years.

They believe that instead of cutting existing benefits for ex-government employees, the DPP government should work hard to improve the lives of retired office workers, laborers or other professionals who may have less lucrative retirements by boosting the domestic economy.

Yao, however, disagreed.

"Is it fair that these people can receive more money when they are off all seven days a week than when they are off only two days a week," Yao asked.

He argued that since the well-being of these government employees has vastly improved compared to the 1960s, it was time to modify the preferential policy.

"The nation has no obligation to maintain an unjust privilege given only to a certain group of people," Yao contended. The key to the controversial reform is deciding to what degree their benefits should be adjusted, he said.

Yao commented that the civil service ministry had already comprimised several times in the face of objections from retirees and opposition politicians. Those compromises resulted in including more bonuses in the determination of base salaries on which retirement income caps would be calculated, Yao indicated.

"Since we have reached a consensus on adjusting the disputed retirement income to a reasonable extent, we will vote and pass the proposal (this week)," he concluded.