The 18% Interest Rate Controversy: Get Back to Basics

The 18% Interest Rate Controversy: Get Back to Basics
China Times editorial (Taipei, Taiwan, ROC)
A Translation
January 14, 2011

Civil service health and retirement benefits include preferential interest rates on bank deposits. Following attacks on the system from various segments of the public, President Ma responded. He said he would conduct an overall review and urge amending the relevant laws. This would ensure fairness, justice, and meet public expectations. We agree with President Ma. We too look forward to a final outcome consistent with the requirements of social justice.

The 18% interest issue has a long history. In 1960, the prevailing interest rate was over 10%. The preferential interest rate on bank deposits for civil servants was set at 1.5 times the standard bank deposit interest rate. In 1979, interest rates fell to 8%. Therefore the preferential interest rate was set at 14.25%. In 1983, after several revisions, both up and down, it was set at the 18% minimum we have today. At the time the bank interest rate was 12%.

The system has been around for some time. So why has it become a source of political and social turmoil? The main reason is that the overall economic and social environment has changed dramatically. The 10% bank interest rate back then has become today's 1%. The government, i.e., the taxpayer, provides this interest to retired civil servants. This interest has surged from seven or eight percentage points, to sixteen or seventeen percentage points. Annual spending has grown from 10 or 20 billion NT to 70 or 80 billion NT. Next year it will grow to a high of 140 billion NT.

But what about the general public? DGBAS statistics tell us that millions of employees across the country earn less than 20,000 NT a month, and 360,000 earn less than 30,000 NT a month. These employees work hard all their lives. Labor pensions are annuitized. But their monthly retirement annuities will be a paltry 10,000 to 20,000 NT. Civil servants however, will receive an average monthly civil service pension of 40,000 to 50,000 NT. Blue collar workers will receive less than 30% of what civil servants receive. If we add additional benefits such as preferential deposit rates, the gap is even greater. This is the source of social discontent.

According to the Bank of Taiwan, over 400,000 depositors have preferential interest rate savings accounts. Twenty percent of them have a balance over 2,000,000 NT. Every month they receive 30,000 NT in preferential interest. Millions of employees earn less than 30,000 NT a month. They must pay taxes to support these pensioners. They must also subsidize them by providing them with interest rates 17 times the market rate. Such a system is naturally going to come under fire.

Consider also the fiscal burden of government. The 18% interest rate is increasingly unsustainable. Those who advocate maintaining the original system point out that workers who entered the civil service after 1996 did not qualify for such treatment. Therefore, the burden on the government will become lighter, and the problem will eventually disappear. But according to estimates if interest rates fail to rise, future 18% interest expenditures will increase. In four or five years it may reach 140 billion NT per year. By the time the system is sunsetted in Year 134 of the Republic of China, the government will have to pay out 2.5 trillion.

Second generation health care has been rammed through, in the hope that the national health insurance system will remain solvent for another five years. It receives little more than 20 billion NT in income. Leave aside middle and low income workers, lunches for impoverished students, and other social welfare spending for the disadvantaged, costing the public billions. When the government starts counting beans, every year taxpayers will have to pay out hundreds of billions in civil service pensions. They will also have to provide interest subsidies to the tune of 70 billion NT. The public will rebel, and the system will find it unsustainable monetarily.

So how should the system be reformed? President Ma has proposed excluding the wealthy, and signing a substitute rate into law, We agree. Moreover, we believe that reform should be based on the concept of an income replacement rate. In many countries the world over, retirees receive a reasonable pension, commensurate with the income they once earned, i.e., the income replacement rate. This rate ranges from 60 to 70%. It is based on the human life span. Peak spending is concentrated at one's prime of life. Work, child-rearing, home purchases, and other large expenditures all occur during this period. Expenses following retirement occur after the peak. An income replacement rate of 60 to 70% can maintain one's quality of life. Therefore, if one receives monthly retirement pensions that exceed a certain percentage, say, 50 to 70%, the preferential savings interest rates should not apply.

As for excluding the wealthy, this might be considered a codicile to the income replacement rate. For example, the statutory income replacement rate might be lower than 60 or 70%. But if one's income exceeds a certain amount, such as 80,000 or 100,000 NT, or a specified multiple of the minimum cost of living, one will no longer qualify for the preferential interest on bank deposits. In addition to the income replacement rate, and provisions to exclude the wealthy, there should be "provisions for the poor." The number of early retirees and low level civil servants on small pensions may be small. But they should not be neglected. They should be given special consideration.

The current system sets the minimum preferential interest rate at 18%. We believe this should be changed, and linked to the market interest rate. One way is to follow the original example, and set the prefeerential interest rate at 1.5 times the market interest rate. But the interest rate today is only 1%. Vested interests will inevitably precipitate a powerful backlash. Therefore a fixed percentage in subsidies will allow the government to control spending.

Reforming the 18% interest rate is bound to provoke a backlash, But the issue has already provoked widespread discontent. The government must proceed. It must get back to basics, rather than sit idly by while the issue is politicized.

中時電子報 新聞
中國時報 　2011.01.14
回歸制度面 談十八趴改革
本報訊

在社會各界對公務員公保養老退休給付的優惠存款利率提出抨擊後，馬總統也有所反應，並表示要通盤檢討與修正相關法令，以符合社會期望公平正義的要求。對馬總統的宣示，我們深表贊同與肯定，更期望看到一個符合社會公平正義要求的結果定案實施。

十八趴可以說是「源遠流長」，從民國四十九年就開始，當時利率約十％以上，給予公務員的優惠存款利率訂為銀行定存利率的一．五倍；到六十八年時，因利率降到八％，才訂出十四．二五的優惠存款利率下限。在經過幾次升降後，到七十二年訂十八％為下限，並沿用至今；當時的銀行利率是十二％。

既然實施已久，為何竟成政壇與社會的風暴所源？主因是整體經濟社會環境大變，當年十％的銀行利率，今日剩下一％，政府─其實就是納稅人要貼補給退休公務員的利息，由七、八個百分點驟增為十六、七個百分點；每年支出由一、二百億增為七、八百億元，未來仍將逐年增加到一千四百億元的高峰。

但一般民眾的情況又如何呢？行政院主計處的統計數字告訴我們，全國有上百萬的受雇員工月薪不到二萬，有三六○萬人月薪在三萬元以下。而這些受雇勞工辛苦一輩子，即使勞工退休金已年金化，但其未來平均每個月能領取的退休年金，只有區區的一．二萬元；但公務員退撫平均月退則達四．五萬元。勞工所領不到公務員的三成。如果加上額外附加的優惠存款利率，差距更大，社會不平之議油然而生。

根據台銀資料，目前開立優惠存款戶者超過四十萬戶，其中存款超過二百萬元以上者有二成，每個月領取優惠利息三萬元。試問，讓那些月薪不到三萬元的數百萬受雇員工，除了繳稅供養退休公務員領月退俸外，還額外再補貼供養其領取遠高於市場十七倍的利息，這個制度當然會受到非議。

此外，就政府財政負擔而言，十八趴也將日益成為不可承受之重。雖然主張維持原制者表示公務員八十五年後的資歷已取消十八趴了，所以政府負擔會日益減少，此問題終會消失。但根據推估，如利率不升，未來十八趴支出會逐年增加，四、五年後可能到每年一千四百億元；到民國一三四年十八趴「落日」時，政府要支出近二．五兆。

特別是，當社會拚死拚活把二代健保通過，以求健保能再撐五年時，也不過多二百多億元的收入；更別提為了中低收入、清寒學生營養午餐…等弱勢支出的幾十億社福支出，政府都要錙銖必較時；每年納稅人卻除了負擔數千億元公務員月退俸支出外，還要補貼七百多億優惠利息；不僅在社會上無法得到諒解支持，在財政上更難以為繼。

那要如何改革呢？對馬總統提出的排富條款、替代率等納入修法的構想，我們深表贊同，而且，我們認為應以所得替代率為改革主軸。以世界各國而言，退休者領取的合理月退金，相較工作期間的所得（即所得替代率），大概在六到七成間。主要是一個人生命周期中，支出的高峰幾乎都集中在工作時期的壯年期，養育兒女、購屋等大筆支出多在此時期發生。退休後則已過了支出高峰期，所得替代率有六到七成，即可維持原有的生活品質。因此，對領取月退俸已超過某一比例（如五到七成之間），優惠存款應全數取消。

至於排富條款，則可考慮作為所得替代率的輔佐條件。例如所得替代率雖然低於法定的六或七成，但領取的絕對金額高於某一數值（如八萬、或十萬，或最低生活費用的某一倍數），則取消優惠存款利息。除了所得替代率、排富條款外，我們也認為該有「濟貧條款」；如果有部分早期退休、領取的退休金低的基層公務員，雖然為數可能非常少，仍不應忽視，應另有考量。

此外，對現制把優惠利率下限訂在十八％的作法，我們也認為該修改，與市場利率作連動。一種方式是仿效最早給予市場利率一．五倍補貼，不過，在利率只有一％的今日，必然引起既得利益者強烈反彈。那麼，就給予固定百分點的補貼，如此才能讓政府支出有所控管。

可以理解，十八趴改革過程中勢必面臨的反彈與壓力，但這項議題確實已引起社會普遍的不平，政府該做的，就是趕緊回到問題基本面去解決，而不是坐視這個議題被政治化。