Pension reform has taken centre stage in Singapore and Hong Kong over the past two years, and more recently, in Taiwan. Just two weeks ago, chaotic scenes outside Taiwan's parliament, the Legislative Yuan, forced a planned review of to be postponed to next month. But pension reform in these three Asian Tigers have been done for different reasons; in Singapore and Hong Kong, reforms have been motivated by a lack of pension adequacy, in Taiwan, pension adequacy is not an issue, but the pension fund is going bankrupt.

“The reform is like halting a horse on the edge of a cliff, and it is critically urgent to save the pension fund from the brink of bankruptcy,” Taiwan’s President Tsai Ing-wen (蔡英文) said in response to the recent protests. According to Minister Without Portfolio Lin Wan-I, in an interview with the Chinese-language broadsheet Liberty Times, the debt from the pension system has reached NT$18 trillion (US$596 billion). He added: “The Public Service Pension Fund has been in the red since 2011. By 2020, the fund’s assets will be completely used up and the fund will be bankrupt.”

In Hong Kong, stickers which read, "Leung Chun-ying must keep his promise", were pasted outside the Chief Executive's office last June after protesters marched to his office. However, in announcing its reforms this year, the Hong Kong government ignored the protesters’ demands even though universal pension was a pillar in Leung’s last election promise.

The Singapore government was forced to consider reform of its pension system after blogger Roy Ngerng exposed the country’s pension adequacy issues – he was later sued by Prime Minister Lee Hsien Loong. In response, Ngerng said that "(his) articles have been calling for greater accountability and transparency" and went on to organize “Return Our CPF" protests with similar demands. A Blackbox survey later showed that more than half of Singaporean respondents agreed with Ngerng that the CPF is unfair. The CPF, or Central Provident Fund, is Singapore's national pension fund.

Pension funds in Singapore and Hong Kong share more similarities with each other than they do with Taiwan's – Hong Kong's Mandatory Provident Fund (MPF) studied Singapore's CPF in the 1980s before deciding against adopting Singapore's model wholesale.

“The Government did not favor setting up CPF, largely because the volume of funds that would be under centralized control for investment purposes might have a major unsettling effect on the financial, monetary and foreign exchange markets,” a Hong Kong government fact sheet reported.

More importantly, “the Government considered that the (CPF) scheme […] could not provide sufficient protection for the retired.”

Remarking on Singapore’s CPF pension fund, Hong Kong's Founding Director of the Hong Kong Centre for Economic Research Richard Wong in 1993 pointed to how the CPF funds were being extracted to finance medical expenses and university tuition fees from the 1980s, on top of already being used for housing since the 1960s, and remarked that “this sequence of liberalization measures contradicted the original aims of the CPF as a compulsory savings scheme." This echoed what the former Singapore Deputy Prime Minister Toh Chin Chye said in 1984 about the CPF after he stepped down in his role: "the CPF has lost its credibility [...] This is the nub of the problem – the credibility of the management, gradual encroachment into the purpose of the CPF which was instituted really to provide for retirement."

"So unless you use the CPF to buy property, your money is in real danger of being kept under lock and key by others, not under your own lock and key," Toh added, criticizing a government which he used to be second in command and a political party he used to chair. Which is why when a non-elected member of parliament Chia Yong Yong said in parliament in 2015 that she is “not entirely sure” that Singaporeans “have the right to spend” their CPF and the Singapore Prime Minister praised the speech as “excellent,” there was much displeasure among Singaporeans who were offended that the government dared lay claim to their CPF monies.

What is actually happening is that, “the CPF started to withhold from individuals an increasingly large portion of their own financial wealth,” Wong pointed out, and it would seem that this has been ongoing since the 1980s.

Indeed, many Singaporeans have come to the conclusion that if they do not spend their pension on housing prior to retirement, their CPF monies are as good as stuck, and with 37 per cent of their wages going into the CPF, this is a hefty amount of money they are forfeiting which many citizens feel they have no choice but to therefore divert into housing. But with Singaporeans at 55 years of age and who have used their CPF to finance their flats withdrawing an average of 55 percent to do so from their CPF Ordinary Account (the larger of two accounts within CPF set aside for retirement), this also explains why many elderly Singaporeans are unable to retire today – figures from the Singapore Ministry of Manpower showed that the number of Singapore residents aged 70 and above, and who are still working has increased nearly three-fold from 16,000 in 2006 to about 43,000 last year.

The Singapore government does not produce annual figures on the annual pension payouts but Singapore Deputy Prime Minister Tharman Shanmugaratnam revealed in parliament that the median monthly CPF Life payout in 2011 was only S$260 (US$185). (All CPF holders who turn 55 from 2013 onwards are automatically enrolled into this CPF Life annuity scheme.) The median payout increased to only S$394 (US$280) in 2014.

According to Tharman, he said in 2014: "our CPF system prepares Singaporeans well for the future. Based on current policies, a new entrant into the workforce today can expect to draw a retirement income of about two thirds of his last-drawn pay if he is a median income earner." He added: "This is around the OECD (Organisation for Economic Co-operation and Development) average." However, the OECD using "a standardized set of macro assumptions" contradicted what Tharman said and instead computed Singapore's gross replacement rate vastly differently - at only 38.5 percent for men and an even lower 34.4 percent for women in its 2013 report, or half what Tharman claimed.

Indeed, when comparing CPF Life's median payout in 2014 with Singapore's monthly median wage of S$3,276 at that time, this payout only represented 12 percent of the median wage.

Allianz International Pensions similarly put Singapore's CPF gross replacement rate at 38.5 per cent in 2014. Hong Kong's MPF performed worse at 34.8 percent but taken as a whole, Hong Kong's system still fares better because of other social security schemes that provide financial assistance for elderly Hong Kongers. The poorest 13 percent of elderly Hong Kongers aged 65 and above received an allowance of HK$5,548 (US$710) every month in 2015, followed by 37 percent who received HK$2,390 and 19 percent who received HK$1,235. (The top-tier amount has been increased to HK$5,869 this year with a new second tier of HK$3,435 added.) Also note that this is on top of the MPF monies that the Hong Kongers would be able to withdraw in either lump sum when they reach retirement age or by monthly payouts. Singaporeans are restricted from withdrawing their CPF monies lump sum.

Where in Hong Kong the additional financial assistance provides coverage for around 74 per cent of the elderly, Singapore's reforms announced last year introduced an allowance that only covers the poorest 20 to 30 percent for an amount of between only S$100 (US$70) and S$250 (US$180) a month. Compare this with the HK$5,869 (US$750) that Hong Kong pays to the poorest 13 percent. Even when you add the S$250 allowance to the median CPF Life pension payout of S$394 in 2014, you still only get S$644 (US$460) (and mind you, a low-income earner would receive a CPF Life payout of much lower than S$394.)

When factoring in the payouts and allowances for elderly citizens, the Hong Kong government still provides more protection for elderly Hong Kongers which puts the overall pension payments per person as closer to Hong Kong's minimum wage of HK$7,176 (US$920). The Singapore government still refuses to define a minimum wage but where the Singapore Management University’s Lien Centre for Social Innovation quotes the basic subsistence wage needed to be earned by a Singaporean worker at S$1,500 (US$1,075), the gap between overall pension payment and minimum wage is the widest in Singapore among the three Asian Tigers.

Lessons from Singapore

Singapore's pension support for the elderly is miserly and miserable.

Still, Singapore's Prime Minister insisted: "I do not think we can afford a universal basic income." But then if the majority of the countries in the world already have minimum wage and Singapore is still one of the very few holdouts which do not, and where Singapore, one of the richest countries in the world – at least measured by overall national wealth – chooses not to have minimum wage, not being able to afford one is a very poor excuse.

Professor Lim Chong-Yah, Emeritus Professor at Singapore’s top two universities - the National University of Singapore and the Nanyang Technological University – and who chaired the Central Provident Fund Study Group in 1985 said in the study report: “[T]he large sums of money vested with the fund are in effect held ‘hostage' to governmental decision-making: ipso facto, this would be acceptable if there is a guarantee that future governments would be as honorable and as capable as the present one, but can such a guarantee ever be forthcoming?”

As the late former Prime Minister Toh said: "What is irksome is this: that the Government is using people's savings and telling them how to spend their savings. That is the nub of the problem."

Writing for the South China Morning Post after Singapore's pension reform last year, Jake Van Der Kamp was blunt: “And there you have a lesson of the CPF. When the boss takes investment decisions out of the hands of the citizens this way and puts them in his own, you just get poorer citizens. Let’s not do what Singapore does.”

Singapore's pension reform was ultimately a masquerade. The reform was inconsequential.

In comparison, Taiwan has a GDP per capita lower than Singapore, but has a pension system which is more generous to its elderly population. The highest pension payments are paid to retired public employees: public school teachers received an average monthly pension payment of NT$68,025 (US$2,240), civil servants received NT$56,383, military personnel received NT$49,379. The replacement rate is known to be as high as more than 100 per cent for these public employees.

On the other hand, for the general public, they are covered by the labor insurance which has an average pension of NT$16,179, or only a third or quarter that of the retired public employees. For Taiwanese who are not covered by any insurance program, the National Pension gives them a monthly insured amount of NT$18,282. Still, the OECD Pensions at a Glance report which last included Taiwan in 2009 in its comparison, noted that, “the highest (pension) replacement rate is found in Chinese Taipei, at 70.0 percent and the lowest is 13.1 percent in Singapore.”

But Taiwan's pension system is perhaps unique. Where the majority of Singapore and Hong Kong's overall pension payments fall below that of the actual or expected minimum wages in both cities, the average pension payments that retired public employees in Taiwan received are two to three times that of the monthly minimum wage of NT$21,009 (US$690). This is sore point in the debate that is taking place in Taiwan now.

The Taiwanese government wants to trim down the pension payments of civil servants, teachers and military personnel and bring it down to be more on par with the average Taiwanese who are on labor insurance. The group of retired public employees are the ones who are mainly protesting against the reforms, and claiming that the government is backing down on promises to them. This is a tricky issue. Critics point to the protesters as receiving such high pension payments due to the low wages that their professions earned in the early 1950s and 1960s which necessitated that the government instituted an 18 percent preferential interest rate on their pensions to ensure that the civil servants would be able to retire with adequate pension, ironically to be able to earn a pension that would be brought on par with the average Taiwanese. Therefore, one would imagine that where these public employees had benefitted from the graciousness that was given to them then, that they would learn to be gracious to others now. (It should be noted that the preferential interest rate system ended in 1995, meaning the people who have a bone to pick would likely be those on the pension scheme prior to that.)

Moreover, as Minister Lin pointed out in the interview with Liberty Times, “early on, civil servants had low salaries, but there were many increases over the years. Today, civil servants have higher average pay than public-sector workers and retirees are mostly concentrated among the highest earners.” Also, where those on the labor insurance system retire at an average age of 61, civil servants retire at an earlier average age of 56 educators retire even earlier, at 54.

But the protesters’ claims are in direct opposition to the opinion of the majority of the Taiwanese public. The Taiwan Thinktank in poll findings released in February this year found that 69.2 percent of respondents were worried that their children might not be able to receive a pension if the pension systems go bankrupt, leading to 67 percent who said that they supported the pension reforms. A higher 70.3 percent in the Taiwan Style Foundation's survey, which released its results in January this year, thought so and 64.9 percent agreed that immediate reforms are needed. Taiwan Thinktank also found that 77.1 percent of respondents supported the idea that the gap between the pension payments for civil servants, teachers and military personnel, and the average worker should be narrowed and 75.5 percent agreed that the 18 percent preferential interest rate should be done away with. This was a higher 79.3 percent in the Taiwan Style Foundation's survey. In short, the protesters have little support and the government seems to have a wide mandate for the pension reforms.

Indeed, where the average monthly wage of private sector workers was only NT$48,490 (US$1,605) (median wage was a lower NT$40,853) and that of young workers aged 20 to 24 was only NT$25,868 last year, the pension payments that the retired public employees are receiving - which are higher than even the average wage – is therefore seen as unfair by the general public. To put it in perspective, Minister Lin provided more details on the pension payments in his interview: “there are 130,000 retired civil servants on the monthly payout retirement plan, more than 42 percent of whom are paid NT$60,000 per month. Nearly 70 percent of retired educators are paid NT$60,000 to NT$80,000 per month, with nearly 8 percent of educators paid a pension of more than NT$80,000.”

Still, National Civil Servant Association president Harry Lee (李來希) who is leading the protests against the reform decried: “How are we supposed to maintain our livelihoods?” But the protesters do not have a case, from an evidence point of view. Their assertions do not hold water - simply put, there is no way they can argue that their pension is inadequate when the majority of them would in all likelihood belong to the top one-third of the richest people in Taiwan, when comparing their pension payments to wages. If the protesters are so much as to be worried that their pension payments would be reduced, they should have worked instead to advocate for higher wages for the Taiwanese in general. Where overall wages would have increased, their extravagant pension payments now would have been considered more acceptable. Otherwise, the protests can be construed as an overbearing attempt at wanting to enrich oneself while leaving the rest of the Taiwanese to fend for themselves, quite ironic when you think about it, as these are the very public employees who should be protecting the Taiwanese citizens in the first place.

The government has sought to appease the protesters by setting a minimum pension payment of NT$32,160 (US$1,065), which it said that if pension payments were to fall below this amount, the 18 percent preferential interest rate would be kept. There were about 3,000 to 4,000 civil servants, teachers and military personnel who received less than NT$30,000 last year (out of an estimated 420,000 retired public employees, which if so would mean that less than one percent of retired public employees received pension payments less than this). But the government’s compromise has done little to placate the protesters.

On the other hand, the very people who should be the ones protesting do not seem to have their voices heard. A good policy it might be to set a minimum pension payment, but what of the average Taiwanese who are receiving the average labor pension of NT$16,179 - half the minimum pension payment that the government is proposing for retired public employees.

But this is where reforms are put in a tight spot. On the one hand, there is a need to bring pension payments to parity, as Lin pointed out that, the pension reforms are “an attempt to bring uniformity to pension calculations […] (and) to eliminate disparities across industries to alleviate disputes.” Yet, how low should pensions be reduced to appease one group but not be set too high so as to be unfair to others who are receiving lower payments? It would seem that the reforms are still unfair and do not go far enough, when you look at it from both sides, one more real than the other perceived.

The fundamental issue, however, could be the depressed wages in Taiwan. Where in 2008 the government introduced the policy of providing NT$22,000 (US$730) in monthly wage subsidies to those who had graduated from college for less than three years, so as to encourage businesses to employ them and protect against unemployment, this instead had the inadvertent effect of young workers being exploited and wages being depressed. In the book, “New Life Courses, Social Risk and Social Policy in East Asia,” Huang Chih-lung wrote "the average salary for newly hired post-secondary graduates has not risen: in 2000, it was NT$28,016, and by 2011 it had dropped to NT$26,577." The average salary rose by less than NT$1,500 for those completing graduating school. In fact, "the actual purchasing power of the starting salary of university graduates decreased from NT$29,115 in 2000 to NT$24,842 in 2011," Huang wrote. Even though the Kuomintang government might not have been able to foresee the fallout of its policy in 2008, the maneuvers have nonetheless served to exacerbate the inequality wage and pension payments between the young and old. But former president Ma Ying-jeou (馬英九)did try to reform the pension system, as did Chen Shui-bian (陳水扁) before him, though both of which stalled, leaving the current Democratic Progressive Party (DPP) party with the third attempt at fixing the system.

Perhaps one starting point to the debate could be to focus on the subsistence amount that an elderly person in Taiwan should receive. The government has set this at NT$32,160 in the current pension reform proposals. At the same time, the poverty rate is set at NT$15,162 in Taipei and minimum wage is set at NT$21,009. Labor rights groups advocate for a minimum wage of between NT$26,000 and NT$28,000 - but these are all varying figures.

If the government determines NT$32,160 to be what the minimum pension for retired public employees should be, is it justifiable then that minimum wage is NT$21,009 and for poverty line to be set at NT$15,162? Also, is this fair to labor pensioners who are receiving only NT$16,179 - barely above the poverty line? It would be inconsistent for the government to explain the need for a minimum pension payment for retired public servants on the one hand while justifying that minimum wage can be lower than that or that the poverty line can be half that of the minimum pension payment. Such discrepancies raise only more questions about whether the various policies are adequate to protect workers in Taiwan. What would be more palatable would be that in the middle-term future that the minimum pension payment of NT$32,160 – if decided at this amount – be extended to all retirees, to provide basic minimum protection for all retirees and for minimum wage to be also brought on par. For a start, labor activists in Kaohsiung have proposed a minimum amount of NT$16,000 for basic pension. It would also be expected that at a subsequent pension reform that the various pension systems would be streamlined into one for parity and efficient management, so as to reduce the excesses that the current duplications are causing. This is similar to what Taiwan Labor and Social Policy Research Association executive director Chang Feng-yi (張烽益) is advocating as well.

How much is enough

The conversation therefore needs to return to the central question – how much is enough for citizens in Taiwan to live on so as to provide each and every one of them with the ability to make a decent living. A fairer calculation of the subsistence amount that a person needs to earn in Taiwan should be computed, with the various minimum amounts for poverty, wages and pension brought into parity with one another, so that there is a central point with which questions on consistency can be discussed. Pension reforms, and wage increases performed with this calculation as a backdrop would serve to convince the population with greater weight.

To be clear, Taiwan’s basic protections are done much better than both Singapore and Hong Kong. At NT$21,009, Taiwan’s minimum wage is low but more adequate than Singapore and Hong Kong when factoring in the cost of living. Consider Taipei’s poverty rate of 1.7 percent which is easily one of the most respectable in the world, whereas both Hong Kong’s and Singapore’s poverty rates, at a respective 19.7 percent and 20 to 35 percent (estimates of relative poverty from a report by the Singapore Management University’s Lien Centre for Social Innovation) puts them closer to the rates of Third World countries. Only Taiwan can lay claim to having free healthcare among the three while Singaporeans have to fork out the world’s highest per capita out-of-pocket expenditure for healthcare in 2014, on a purchasing power parity basis. Needless to say, Taiwan’s pension adequacy is way ahead of its counterparts. So, there is much that the Taiwanese can be proud of. Though, one cannot rest on one’s laurels.

There have been concerns that the DPP government which rode into power in 2016 on the back of civil society is seen as turning its back on the latter and being biased towards businesses instead. As the labor union leaders who have formed the 2017 May 1 Action Alliance group explained: they perceive “spoiled bosses” as exploiting workers and warned the DPP and President Tsai not to take advantage of the support of workers for their party.

There is some truth to their concerns. The share of income that goes to the top 10 percent in Taiwan has increased from a low of 23.4 percent in 1980 to a high of 38.2 percent in 2012. For the top 1 percent, their share of income has increased from 6 percent to 11.3 percent. This puts Taiwan on par with the some of the most unequal countries in the developed world – Singapore and the United Kingdom rank as two of the most unequal countries, together with the United States, where the top 10 percent grabbed an income share of 41.8 percent and 39.1 percent respectively in 2012 and where the top 1 percent took 13.6 percent and 12.7 percent respectively, which are similar with Taiwan, surprising considering that Taiwan’s inequality as measured by the Gini coefficient is much lower. In addition, the share of labor income in Taiwan's gross domestic product (GDP) has also dropped from 51.4 percent in 1990 to 45.8 percent in 2005, and to about 43 percent by 2010, meaning that workers in Taiwan do not gain as much from Taiwan’s economic growth as they had in the past, while profits for businesses are climbing.

As such, there is a lot of room for the wages of workers to grow. Where businesses had taken advantage of the popularly-known-as ‘NT$22,000’ policy in 2008 to depress wages and the new labor regulations to increase prices – indeed economist Hsin Ping-lung has pointed out that even though costs did not increase by more than 5 percent when a law to mandate a two-day weekend scheme for workers was introduced and overtime pay increased, businesses have still used the regulations as an excuse to increase prices by 10 to 20 percent - the DPP government therefore has to take drastically bolder moves to put businesses in their place, and defend the workers. An assertive policy is required to not only reverse the effects of the 2008 wage policy but to propel the wages of workers to be where they should have grown to if wages had not been depressed.

At the core of the displeasure with the pension reform and for many Taiwanese who turned their backs on the KMT at the last election to dramatically cause an upswing in support for DPP, is an earnest appeal for their wages to be increased and their livelihoods to be protected. The DPP government needs to define a consistent amount that would provide all peoples living in Taiwan with a decent livelihood and communicate this to the larger public. The public also needs to be able to understand that the DPP government has a larger strategy in its reforms and that it would ultimately work towards the interests of workers without making compromises with businesses, with which workers have already sacrificed much for over the last few years, as the statistics have shown.

At the very least, Taiwan's pension adequacy is performing much better than Singapore and Hong Kong. This is something that the Taiwanese can take heart for, though pension reforms are required to ensure that the pension systems would be sustainable. If anything, the Taiwanese have a democratic system with which they can use their voices to act upon to advocate for change, and to improve their own livelihoods and that of other Taiwanese. It would be hoped that in the conversation for the reform of the pension system that while the protesters speak up for their own rights, that they would also speak up for retirees across all spectrums and seek an outcome that would be beneficial for all of Taiwan and the Taiwanese, as well as the workers here, and prod Taiwan towards a more durable future.

Editor: Edward White