Gov't eyes variable rate to set preferential interests
The China Post news staffTAIPEI, Taiwan -- The government is considering using a variable rate to determine preferential interest payments for retired civil servants, a source familiar with the government's pension reform said yesterday.
January 28, 2013, 12:00 am TWN
The source made the remarks after media reports claimed the rate at which civil service retirees get their preferential interests will be cut from the current 18 percent to 9 percent.
“We've discussed all possibilities, including lowering the rate from 18 percent to 15 percent or 12 percent,” the source said. “In the end, we've decided to use a variable rate system, under which the interest rate is to be calculated based on the rate for a two-year time deposit at Bank of Taiwan multiplied by a coefficient and is to be no more than 9 percent.”
According to the source, members of the Executive and Examination Yuans reached this agreement after a meeting on Saturday that discussed how Taiwan's pension reform is to be carried out. A report on the reform measures will be delivered during a news conference on Wednesday.
Among the key points of the report are: setting the income replacement rate for civil servants' pensions at 75 to 80 percent; lowering the rate for preferential interests received by civil servants; toughening eligibility requirements so that civil servants can get monthly pensions only if they retire at 60 after having worked in the civil service for 30 years; keeping the base for calculating income replacement rate for laborers at 1.55 percent; and a proclamation by the government that it will set aside a budget to make up for possible losses in Taiwan's labor pension fund to keep it from going bankrupt, the source said.
According to the source, it was believed that making civil service retirees' preferential interest rate variable would be the least confusing way to reform the system.
“What we're doing is trying to avoid giving an exact figure, because, with the replacement rate set at 75 to 80 percent, payments that exceed it will be cut,” he said. “And the cut will be either on their monthly pensions or on their preferential interests, which, in extreme cases, may be cut to zero.”
The opposition Democratic Progressive Party (DPP), meanwhile, will propose its own pension reform scheme that calls for a uniform system applicable to all segments of the population, including civil servants, teachers, military personnel, farmers and laborers. The proposal will be unveiled by DPP Chairman Su Tseng-chang today.
“What our proposal tries to achieve are sustainability, fairness, transparency and pragmatism,” said Lin Wan-yi, who runs one of the DPP's think tanks.
“For example, there is no reason that laborers' monthly pension eligibility age is 65 when that for civil servants is 60,” Lin said. “That's not fair, and that's something we're trying to change.”