Monday, January 12, 2015

Liberty Times: Urgent need for pension reform

Liberty Times: Urgent need for pension reform

2015/01/12 10:57:30

A protest organized by retired public sector workers in Kaohsiung in 2012.

The public eye has focused on the cushy treatment of civil servants after a retired teacher revealed that 10 of his family members have together received an astonishing NT$80 million (US$2.5 million) combined in pensions over the past decade as retired public employees.

Public sector retirees can collect NT$70,000 to NT$80,000 per month without having to work, whereas more than 3 million private sector workers in Taiwan are making less than NT$30,000 per month. The situation has intensified conflict and confrontation between different classes and generations, which poses a threat to social stability and was a main cause behind the ruling Kuomintang's defeat in the Nov. 29 local government elections.

According to an official report released in February 2014, Taiwan's pension programs for public and private-sector retirees will together create unfunded financial obligations totaling NT$17 trillion for the government in 20 years.

The income replacement ratio of Taiwan's public-sector retirees is 95 percent -- meaning they are pulling in almost as much in pension as they were making on the job -- ranking third in the world after only debt-laden Greece's 111 percent and Iceland's 109 percent. Workers in Taiwan also tend to retire earlier than those in other countries, putting a huge financial burden on the nation's pension programs.

The problem is likely to worsen due to the country's declining birth rate and rapidly graying population. It is predicted that by 2060, every retiree will have to be supported by 1.3 workers, up significantly from 1991, when every retiree was supported by 10.3 workers.

In the event of a financial collapse, Taiwan will face worse problems than Greece because the European Union member has had the backing of the EU and the International Monetary Fund.

Although President Ma Ying-jeou has not much time left in office before his term ends next year, he should use the remainder of his term to honor his promise to reform the pension programs. (Editorial abstract -- Jan. 12, 2015)

(By Y.F. Low)

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