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Experts call for pension fund reforms

The government should relax restrictions on pension funds and offer more incentives to cope with rising demand from an aging society for secure retirement options, experts said in a forum on the issue last week.

The suggestion came after the government implemented a new National Pension Fund for Workers last July, under which employees can choose whether or not they want to make contributions.

However, due to its limitations, the new system would not be able to guarantee its members a comfortable retirement, experts said at the forum arranged by Taipei-based Smart (智富) monthly and rating agency Standard and Poor's last Friday.

"The pension fund, which is worth tens of billions of dollars, is not being properly managed as investors are only allowed to invest in products with short-term returns," said Chiu Hsien-bi (邱顯比), chairman of the Pension Fund Association of the ROC (中華民國退休金協會) in a press release.

The National Pension Fund for Workers has a secured return yield of less than 2 percent, similar to the two-year deposits offered by local banks.

"The government should offer more options to workers joining the retirement scheme," Chiu said.

Chiu also said that the government should employ private fund managers capable of raising the risk -- and hence the returns -- of the scheme's investment portfolio.

The fund currently increases by an average of NT$8 billion a month, but cannot be properly managed thanks to legal restrictions, according to the laborer's pension fund committee. The committee said new legislation needs to be passed.

Taiwan's birth rate hits a new low last year at 1.12 percent, which is also the lowest around the world, with the result that the nation is aging fast, according to the government statistics agency, the Directorate General of Budget, Accounting and Statistics.

Pension funds in North America and Europe face bankruptcy as a result of rapidly aging populations, according to S&P.

To avoid this pitfall, Jennifer Wang (王儷玲), a professor at the Department of Risk Management and Insurance of National Chengchi University, advised the government to offer more incentives, such as tax breaks, to encourage laborers to contribute to pension funds.

On top of that, Wang said the government should relax restrictions to facilitate the trading of more funds on the nation's capital market.

“The looser the restrictions are, the better for the pension fund market,” Wang said.
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