2013.04.open studio1 confronting pension reform

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2013 Open Studio Series

Confronting Pension Reform

Posted April 23, 2013

The Democratic Progressive Party (DPP) held the first of its 2013 Open StudioSeries, which are policy forums discussing a wide range of topics concerning

domestic politics and foreign relations. The April 23rd symposium, Confronting

Pension Reform, examined the issue of reforming retirement benefits of civil

servants with reviews and discussion on the impact of the Examination Yuans recent

draft bill on civil service pension reform. Professor Lin Wan-yi, executive director of

the DPPs think tank, presided over the forum. Invited guest speakers included:

Professor Emeritus Huang Shin-hsin, of National Taipei Universitys Department of

Public Finances; Wu Chung-tai, deputy director of the National Federation of

Teachers Unions (NFTU); and Lee Chun-yi, DPP legislator from Chiayi City. DPP

Chair Su Tseng-chang, personally attended the forum from beginning to end.

Remarks by Legislator Lee Chun-yi:

The most important aspect of our nation's pension reform ought to be centered on the

principles of fairness and justice as well as solvency and sustainability. Based on that

notion, my review revealed the Examination Yuan and its reform bill failed to address

the principles that are most germane to our society.

The difference in pension rates for civil servants compared to regular laborers, as

suggested by the government's draft bill, is unfair and unjust. The Examination Yuans

draft bill would cause unfairness between generations because upon passage of thisbill, the newer recruits of civil servants and school teachers will bear the brunt of the

cut in their future retirement benefits. From an overall perspective, the draft bill not

only creates generational unfairness, it also causes conflicts among people with

different occupations. I call for a thorough deliberation on all aspects of the draft bill,

especially on the section that determines the unreasonableness in the pension rate for

civil servants and public school teachers.

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Remarks by Wu Chung-tai, deputy director of the National Federation of

Teachers Unions (NFTU):

The draft bill, approved by the Examination Yuan, is "not worthy of saving". In the

best case scenario, the bill can only keep the civil service pension afloat for another

six years before it goes bankrupt, and five for teachers pension. At this rate, the draftbill bears little significance insofar as "efficient reform" is concerned. I question the

merit for this reform, calling it pseudo instead of real.

I suggest a two-pronged approach to rescue our pension plan: using year 2016 as a

cutoff point, we should create a new pension system so that in the future, both

pensions, new and old, can be reformed, rescued, or funded separately.

Lastly, I suggest accountability for those responsible for past policy mistakes.

Remarks by Professor Huang Shin-hsin:

Spending years on studying civil service retirement policies, basing their opinion on a

dodgy actuarial report, the whole society and especially the government, singled out

the insolvency as the crux of our pension problem, making the policy planning look

like a labyrinth. The referenced actuarial report is based on crooked probabilities and

analysis that are more dubious than the one used to sell commercial or business

insurance. Currently the pension savings account still has NT$3 trillion dollars to

cover the entire system. As to why the civil service pension continues to face a

mounting liability, it is because the civil servants are allowed to retire at a young age;

just by retiring 10 years early, retirees can put considerable strain on the system

because they stop paying for contributions and start collecting benefits.

The problem with our pension system is in its eligibility policy, which should be the

focus of our reform.

In a colloquial expression, the Examination Yuans draft bill appeared to be going

topsy-turvy.

One Tier Too Fat; Two Tiers Too Thin"; "Head Hurts Treat Foot; Foot Hurts CheckHead.

Even if civil service pension is reformed, the first tier pension benefactors can still

walk away with a whopping 40-60K monthly check while the poor laborers, under the

labor insurance, with the total of first and second tiers monthly benefits combined,

barely make 30K a month. The government should renounce a lopsided reform bill

like this.

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Remarks by Professor Lin Wan-yi, executive director of the DPPs think tank:

The draft bill approved by the Examination Yuan is utterly unfair for the newer civil

service recruits. With regards to the pension rate for civil servants, it has recently beenmade more reasonable than it was before, nevertheless, the change, applicable only to

the new recruits, merely brings the pension rate more in tune with that of the regular

laborers.

Furthermore, already the public has misgivings about a policy that doesn't take effect

until year 2016. Still, the unfairness still exists between those civil servants that

retired in 2001 and the regular laborers. All in all, the procedural details and the

reform process for our various annuity programs, regardless of specific service sector

or between different occupational sectors, deserve our utmost attention. I urge the

government makes a real effort to listen in on the recommendations from all sides.

Note by editor: These remarks are translated from a press statement, and not

presented in full as delivered at the conference.

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2013.04.open studio1 confronting pension reform

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