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Pension fund could be in the red by 2018

Pension fund could be in the red by 2018

Things are not looking good for Taiwan’s retirement pension system. Account balances are already starting to tip into the debit side for military, civil service and teacher retirees, and actuarial reports indicate that the entire system could be in the red within three years. Hidden liabilities in the system reached a total of NT$7.3 trillion at the end of 2011, and the overall system is expected to have trouble "making ends meet" by 2018. Once income from premiums paid in fails to keep up with payouts, say insiders, it will be very difficult to reverse the trend, and the entire system could be in danger of bankruptcy by 2027.

Figures compiled by the Ministry of Labor (MOL) indicate that it may take a hike in premium rates to a level as high as 27.84% in order to swing accounts back into the black. If so, such raises would be done gradually in steps. This year the rate has already been increased to 9% (including a 1% premium to cover unemployment insurance). This will be further increased by 0.5% each year until it reaches the current legal limit of 12%. When that happens, the MOL will seek to have relevant laws amended to raise the legal limit to 18.5%. At the same time the minimum retirement age will be slowly raised to reach a limit of 65 by the year 2026.

In addition, the MOL has launched a series of reforms intended to improve the efficiency of investments made using labor insurance funds. It may also trim benefits based on the age of retirees and gradually postpone the age limit for qualifying for monthly payouts from the system.

The MOL said that projections of return on investment, premium hikes and payment adjustments have not changed and there are currently no plans to consider funding using the national treasury. At the same time, in the past three years income in the system has held at over NT$30 billion as labor insurance premiums have gradually been increased. This year bean counters for the ministry are not quite so optimistic about expected figures.

Sun You-lian, Secretary General of the Taiwan Labor Front, said Wednesday that in 2009 the pension system was revised to incorporate subsidies of hundreds of billions of NT dollars by the government and certain raises in premiums and delays in the retirement age. Two years ago President Ma Ying-jeou said the government was ready to promote further reforms in the pension plan, but nothing ever came of it. Now payouts are starting to surpass income in the system and still the government has failed to act. Sun asked why changes are being proposed in regulations regarding pension terms for workers while terms for military and government employees are untouched. He stressed that pension reform must be fair and reasonable, and should help achieve a more equitable distribution of resources among the people.

Chu Wei-li, the Director of the National Independent Workers Union, said that the standards and needs of the pension plans for labor and those of military and government personnel are different. He said that cutting back on pension benefits for military and government personnel would not necessarily bring any benefits for labor. He called for the government to develop a more effective system for the labor pension program and not concentrate on just raising the premium rates for workers. Premiums and payments for military and government employees should be compared to see whether government subsidies are needed to keep the system viable.

Updated : 2021-09-28 20:00 GMT+08:00