Thu, Jul 22, 2004 - Page 10 News List

Insurance firms might manage pension funds

RETIREMENT MONEY Under a new law that takes effect next year, people will have individual accounts that will allow them to build up funds even if they change jobs

By Jessie Ho  /  STAFF REPORTER

The government plans to allow insurance companies to manage pension funds as an alternative for workers to make use of their pension money, government officials said yesterday.

Lee Lai-hsi (李來希), director of Department of Labor Standards under the Council of Labor Affairs, made the remark during a gathering of the Taipei-based business group Third Wednesday Club (三三會).

According to the newly passed Laborers' Pension Law (勞工退休條例), which will go into effect next July, employers need to direct 6 percent of employees' salaries per month -- up from 2 percent -- to an individual retirement labor pension fund.

The new system will allow workers to continue to build up their retirement funds even if they change jobs, and to draw a monthly pension after they retire.

Lee said the council is reviewing a bill to allow large corporations -- those with more than 200 employees -- to hire insurance companies to manage their pension funds if their employees consent. Such a move could help the funds earn higher returns.

Otherwise, the funds will be overseen by a yet-to-be established committee composed of authoritative financial professionals, he said.

The new regulation, if passes, would affect about 700,000 employees, Lee said.

Meanwhile, Council of Labor Affairs Chairwoman Chen Chu (陳菊), who also attended the meeting, stressed the benefits of the new law.

Various business groups have complained that the 6-percent monthly allocation is too high and may hurt small- and medium-sized enterprises (SMEs).

The law also requires companies that fail to allocate funds for their employees to make up the shortfall within five years.

The council estimates that 448,000 of the more than 500,000 SMEs do not direct pension funds for their employees.

Chen said employers do not need to worry too much, as the law merely requires them to start to make up the shortfall within five years, not pay the full amount by that time.

However, Tatung Co (大同) president Lin Wei-shan (林蔚山) said that he has had a hard time figuring out how the new regulation differs from the old one.

"I think the council needs to make it clearer by next July, or companies will be in chaos at that time," Lin said.

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