by Xin Yage

An aging population and low birth rate are a threat to the country's pension funds. Those for military, civil service and teachers are in fact expected to go bankrupt between 2019 and 2027. The issue has sparked an intense debate between and within parties.

Taipei (AsiaNews) - Taiwan's pension funds are like a train headed towards a cliff. President Ma Ying-jeou (馬英九) made the analogy yesterday at a press conference he called to present his reform plan for the next 30 years. He was accompanied by Premier Sean Chen (陳冲), Legislative Speaker Wang Jin-pyng (王金平) and Examination Yuan (Personnel Selection Office) President John Kuan (關中).

With an aging population and a low birth rate, the island nation's pension funds for private-sector employees are expected to become insolvent by 2019, whilst those for the military, civil service and teachers would go bankrupt between 2019 and 2027. In view of the situation, "the train will definitely fall off the cliff if we don't start building a bridge right now," the president said.

In the past two months, a task force led by Vice Premier Jiang Yi-huah (江宜樺) came up with a plan to reform the system following negotiations between the cabinet and the Examination Yuan.

Jiang met 124 delegations for a total of 11,000 people: academics, experts, business people, merchants and representatives of various social groups.

The plan calls for a reduction of the preferential 18 per cent interest rate on savings accounts held by retired civil servants to 9 percent within the next five years.

In the past two weeks, heated discussions have taken place on TV over the public service pension fund with representatives of the private sector complaining loudly of the many advantages of their public sector counterparts.

Until two days ago, 12 per cent rate seemed to be the bottom line for cuts, but the government settled for 9 per cent because of strong opposition and the negative expectations about the future.

However, this has sparked an intense debate within the ruling Kuomintang (國民黨) because going from 18 to 9 per cent in preferential interest rate will affect disproportionately the social groups that traditionally support the party. In turn, this might have consequences in next year's local elections.

Still, "We have to recognise that over the past 20 years, the population has aged rapidly, the birth rate has declined, and people are paying less, retiring earlier and collecting more," Ma said of the challenges facing Taiwan. The planned changes will not only affect "my pension or yours" but also that of "our grandchildren and their children."

The plan is still on the drawing board and will be improved through further negotiations before it reaches parliament for approval in April. The reform inevitably will be gradual and will not please everybody. For example, one aspect of the plan includes extending by fire years the retirement age of teachers and public servants.

For the Democratic Progressive Party (民主進步黨, DPP), the country's main opposition party, the plan is inadequate and too costly for labour. For the DPP, no one should be able to retire before 65.

Lin Wan-yi (林萬億), executive director of a DPP think tank, the retirement age for all occupations should be raised to 65 by 2027, noting that civil servants can now retire at 55 and military personnel at 43.

As for the income replacement rate, the DPP suggests it should be based on the last ten years of employment. The guiding principle should be equity between ordinary citizens, farmers and private sector employees on the one hand and public sector workers and the military on the other.

• taiwan
• pension
• funds
• reforms
• discussions
• low
• birth
• rate
• aging
• population