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TAIPEI, June 27 (Reuters) - Taiwan's legislature passed a bill reforming pensions for civil servants on Tuesday, eliminating 18 percent annual interest on savings, starting in 2018, as the population ages.
Passage of the bill fulfils a campaign promise of Taiwan President Tsai Ing-wen and is projected to delay the possibility of a default in payments to retirees by a decade.
Instead of 18 percent, pensions will receive nine percent from July 2018 until the end of 2020, and then be reduced to zero starting in 2021.
The bill only covers civil servants. Additional legislation reforming the pension system for teachers and the military will be reviewed later.
Lawmakers of the ruling Democratic Progressive Party and the opposition Kuomintang were not immediately available for comment.
Pension reform is critical for Taiwan as large payouts are no longer sustainable for the export-reliant economy, with contributions crimped by slower economic growth and a rapidly aging population.
The plan has angered public servants, many of whom say it will ruin their retirement plans. Thousands of military personnel, teachers, police and civil servants have protested against the plan several times.
Pensions for civil servants could default by 2030, teachers by 2031, and other workers by 2048, government data shows, if the system is not reformed. (Reporting by Faith Hung; Editing by Nick Macfie)