New retirement age system to save gov't NT$600 bil.
The China Post news staff
January 31, 2013, 12:06 am TWN
TAIPEI, Taiwan -- The government will save up to NT$600 billion in retirement pension payments for civil servants after the “Rule of 90” is adopted to determine their retirement age instead of the existing “Rule of 85,” Examination Yuan President John Kuan said yesterday.
Kuan made the remarks in an interview with the Central News Agency held hours after attending a press conference presided over by President Ma Ying-jeou to announce the government's new annuity reform program.
Under the Rule of 90, a civil servant can only retire with benefits after his age plus years in service add up to 90. For instance, a civil servant who has reached the age of 65 and who has been working for 25 years is eligible to retire. Currently, civil servants can retire if their age and years of service add up to 85.
Kuan said that by raising the retirement age, the government can save one-third on current pension payment costs, as it will neither have to hire so many new staff nor have to pay so much in retirement benefits at the same time.
Accordingly, Kuan stressed, the first priority for reforming the civil servant retirement system is to raise their retirement age by adopting the rule of 90 approach amid worsening government finances.
Kuan also noted that the government will allow a 10-year buffer period for the implementation of the rule of 90. But civil servants engaged in special tasks, such as police officers and fire fighters, will remain subject to the existing rule of 85 rather than the new rule of 90.
In addition, the monthly retirement pension will be calculated based on the average of the monthly pay a civil servant receives during the 180 months before his retirement.
At the moment, civil servants who retire can receive at least 90 percent of their preretirement income as monthly pension income, higher than most countries.
The controversial 18-percent interest rate for civil servants who retired before the current retirement system was implemented in 1995, or who retire later but with seniority in the old system, will be gradually cut to 12 percent in 2016, 11 percent in 2017, 10 percent in 2018, and 9 percent in 2019. The interest rate will be set at the Bank of Taiwan's one-year deposit interest rate plus 7 percentage points from 2020 onward. The ceiling rate will be set at 9 percent.
Under the civil servant retirement reform program, if those who choose to have part of their civil servant insurance annuity subject to the 18-percent preferential interest rate, then their maximum monthly retirement pension won't exceed 75 percent of their preretirement monthly income.