Ma missed boat on pension reform: DPP

Today Ma's Cabinet is scheduled to release its pension reform plan, after weeks of heavy media speculation. Items under the knife include the income replacement ratio, the salary base for calculating pensions and the preferential interest rate for the pensions of retired civil servants.

The DPP offered a grim prognosis for the reform plan yesterday.

“The Cabinet draft was built in the absence of dialogue, so it will absolutely trigger public blowback,” said DPP Legislator Chao Tian-lin (趙天麟).

The Cabinet made a second error by handling the pensions of civil servants and the labor class at the same time, which has exacerbated public confusion, according to Chao.

Former DPP Chairwoman Tsai Ing-wen seconded the sentiment, saying that Ma's lack of transparency and communication has doomed his reform push.

“Pension reform is not just about a few numbers,” she said.

Rather, pension reform is bound up with society's sense of security, and is related to the just allocation of state resources, she continued. “These issues must be resolved through much communication and negotiation.”

The Cabinet's plan is yet unpublished, but the recent reactions of labor, education and civil service organizations indicate that Ma's communication with society has been inadequate, according to Tsai.

“The ruling administration's handling of the annuity situation has been very worrying. They will not be able to solve (financial) problems, and may have simply polarized society instead,” she said.

“Most worrying is that the KMT will exert their legislative majority to force passage. That is not a good process for reform.”

The DPP has leaked select details on its own pension reform proposal, but is waiting for Wednesday to formally publish.

No More 18%

The DPP plan cancels the 18-percent preferential interest rate for civil servants, according to Lin Wan-i (林萬億), an author of the proposal and executive director of the major opposition party's think tank.

Currently, retired civil servants may deposit their pensions at an 18-percent preferential interest rate. Rather than reducing the preferential rate or linking it to the market interest rate, the DPP proposal terminates it altogether, according to Lin.

The DPP plan also lowers civil servants' income replacement ratio from about 90 percent to 70 percent, to ease the state's financial burden while allowing retirees to maintain a certain standard of living, according to Lin.

The proposal also sets a cap of 16 percent on the maximum premium rate for labor insurance. The Cabinet may propose raising the maximum premium from 12 percent to 19.5, which is unnecessarily high, said Lin.

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