Newspaper article China Post

Pension Shortfalls: A Modern Crisis

Newspaper article China Post

Pension Shortfalls: A Modern Crisis

Article excerpt

The bankruptcy of public pension funds is an issue worldwide.

According to a recent study conducted by Allianz, pension systems in most Asian countries are "fragile and unstable." Hong Kong and Singapore are the only counties in Asia to rank within the top 20 nations worldwide for pension sustainability.

Western countries face the same problem. There is a gap of US$78 trillion in pension funds among the 20 richest countries in the world. In Germany, France, Italy, England, Portugal and Spain, pension fund liabilities amount to more than three times each country's national GDP.

In Taiwan, the pension issue is particularly severe.

Civil servants have taken to the streets to protest the government's plan to cut their benefits, while a smear campaign accuses them of causing the pension system's woes in the first place.

It is unusual that teachers, soldiers and public servants - usually seen as some of the most stabilizing forces in society - should take to the streets and protest their own government.

Of course, it is not fair to make civil servants the scapegoat for the pension system's impending bankruptcy. After all, the system was designed by the government.

But it is also hard to ignore the reality that in Taiwan, the average monthly pension for civil servants is at least three to four times higher than that of those in the private sector.

Not to mention the fact that funds for civil servant pensions are derived primarily from taxes paid by companies and non-public sector workers.

It is similarly difficult to overlook the depravity of a system that allows a retired civil servant to earn a pension three to four times higher than the salary of a hardworking young person.

These factors have sown discord among the population. They also make it difficult for ordinary workers to lend a sympathetic ear to retired civil servants who are asking the government to bailout their pensions.

If the government follows the doctrine of legitimate expectation and pays retired civil servants what they have demanded, the expense would crowd out government funding for other social welfare projects. After all, it is not only the pension system for civil servants that is facing bankruptcy.

Dissatisfaction is a natural response from private-sector workers and has allowed the call for cuts to civil servant pension funds to go viral.

It has caused disputes between civil servants and workers who are not in the public sector. Threats to social disorder are growing stronger.

Threats to Pension Systems Worldwide

Two major factors threaten the pension systems worldwide: reduced birthrates and the widening gap between the rich and the poor due to economic liberalization.

Pension systems require contributions from the workforce to function. If more retired people receive pension payouts and fewer working people contribute to the fund, the system is doomed to fail - that is, unless the government steps in. …

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