Bill passed to cut civil servants’ retirement benefits


TAIPEI, Taiwan — A bill that will dramatically cut the retirement benefits of Taiwan’s civil servants cleared the Legislative Yuan on Tuesday and is scheduled to take effect in July 2018.

The change, however, will not affect pensioners who receive less than NT$32,160 per month — the minimum protected level stipulated by the bill governing retirement, pension and severance of civil servants.

According to the bill, the preferential, government-subsidized 18 percent interest rate on savings for those who receive NT$32,160 per month or more in retirement income will be reduced to 9 percent from July 1, 2018 to Dec. 31, 2020, and cut to zero starting on Jan. 1, 2021.

In the case of retirees who opted for a lump sum retirement payment rather than a monthly pension, the preferential interest rate will decrease to 6 percent over a six-year period.

The lower interest rate will save national coffers NT$80 billion per year, said Lee Chun-yi (李俊俋), a whip of the ruling Democratic Progressive Party caucus.

The bill, meanwhile, will also gradually lower the income replacement rate for pensioners who are receiving NT$32,160 per month or more.

Those with 35 years of service will see their income replacement rate drop from 75 percent to 60 percent over a 10-year period, and those with 15 years of service will see a decrease from 45 percent to 30 percent over the same period of time, according to the bill.

One of the factors in the formula for calculating the pension of civil servants — how much they made when employed before retiring — will also be gradually adjusted.

The formula is currently based on civil servant salaries in their last month of service.

But that will be changed to average monthly salary in their final five years of service when the bill takes effect and to average monthly salary over the final 15 years of service over a period of 10 years.

To prevent retired civil servants from receiving double incomes, the bill stipulates that those who transfer to other positions entirely or partly funded by taxpayer money after retirement and receive more than the minimum wage will have their monthly pension suspended.

In addition, civil servants’ minimum age of retirement with full pension will be 60 starting in 2021.

The retirement age will be raised by one year every year until it reaches 65 in 2026.

The retirement age of civil servants undertaking dangerous duties, such as police officers and firefighters, will remain at 55.

The bill is part of several pieces of legislation introduced by the government to reform the deficit-ridden pension programs for the country’s civil servants, public school teachers and private-sector workers.

Unless changes are made, the pension program for military personnel is expected to go bankrupt in 2020, that for private-sector workers in 2027, public school teachers in 2030 and civil servants in 2031, according to projections made by the government.

In the wake of the bill’s passage, the Presidential Office said it was happy to see progress in the government’s efforts to reform Taiwan’s pension system and looks forward to other related legislation being passed in a timely manner.

DPP spokesman Wang Min-sheng (王閔生), meanwhile, described the bill’s passage as the first step toward important reform in Taiwan, saying the DPP hopes the other bills will clear the Legislature just as smoothly in the interest of inter-generational justice.