Taipei-- The 18-percent preferential interest rate on savings deposits, up to a set limit, for public sector employees could be phased out over a period of six years, Vice President Chen Chien-jen (???) said Thursday.
Announcing the government's pension reform proposal, Chen said the plan is to reduce the interest rate every two years in three stages -- from nine percent to six percent, then three percent, with the final step being the elimination of all preferential interest after six years, Chen said.
However, the 18 percent preferential rate will remain in place for public sector employees whose monthly pension income is below a designated minimum, to be set at either NT$25,000 or NT$32,160 (US$791 or US$1,021). Chen said this exemption ensures less-well-off public sector retirees have enough income to get by.
The 18 percent preferential interest rate policy was introduced in the 1960s, when the average income of teachers, civil servants and military personnel was lower than that of other professions. Hence, the preferential rate was originally intended to alleviate hardship among such professionals as a source of supplementary income.
Meanwhile, with regards the income replacement rate of pensions, the vice president said that the rate would first be reduced to 75 percent and then a further one percent annually until it reached 60 percent.
Under existing pension plans, government employees receive up to 95 percent of their pre-retirement income as a pension, which places a strain on the nation's finances.
For those public sector retirees who have already received the preferential interest rate on savings, the government will not seek to claw back those benefits, the vice president said.
Source: Focus Taiwan News Channel