Mon, Oct 16, 2006 - Page 12 News List

Foreign companies may manage labor pension funds: CLA


The Council of Labor Affairs (CLA) said yesterday that it would allow foreign investment trust companies to operate some of the nation's labor pension funds beginning next year.

A CLA spokesman said that the council is expected to release a notice by the end of this year inviting foreign investment trust companies to seize the opportunity to operate some NT$10 billion (US$301.2 million) of the NT$410.78 billion in labor retirement reserves held by the council.

He added that approximately 48 percent of the funds are currently deposited in banks, with a yield of just 3.2 percent a year.

The spokesman contrasted this with the NT$38.5 billion the CLA had commissioned nine domestic investment trust companies to handle in the past three years which were able to bring in impressive revenues with return rates of 20 percent to 49 percent per year.

Fubon Investment Trust (富邦投信), for instance, reported the highest return rate of 49.6 percent on the NT$2 billion it has under management between June 2004 and August this year, according to the CLA's statistics.

In order to make better use of the labor pension funds and create more benefits, the council has decided to allow foreign investment trust companies to operate NT$10 billion of the funds from next year and that amount will be increased if performance meets expectations.

In response to the council's announcement, financial experts such as the Pension Fund Association of the ROC (中華民國退休金協會) said that the pension funds were not being properly managed as investors were only allowed to invest in products with short-term returns.

They said that the council should not only allow foreign investment trust companies to manage the funds, but also relax restrictions to permit pension funds to engage in a wider scope of investment targets, including global equities and fixed-income products, to meet an aging society's demand for better and more secure retirement options.

The nation's birth rate hit a new low of 1.12 percent last year, making it one of the lowest around the world, according to statistics provided by the Directorate General of Budget, Accounting and Statistics.

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