Sun, Oct 28, 2012 - Page 8 News List

Taiwan short-sighted on pensions

By Ho Yen-tang 何燕堂

People like Hon Hai Group chairman Terry Gou (郭台銘), Formosa Plastics Group chairman William Wong (王文淵) and Taiwan Semiconductor Manufacturing Co CEO Morris Chang (張忠謀) do not have any worries about their pensions, and neither do military personnel, public school teachers or public servants, who enjoy a considerable and comprehensive retirement package as state employees. The only people who have to worry about their pensions are private workers. Therefore, the crisis over the impending bankruptcy of the LIF is not just a question of whether the labor insurance system in its current form is sustainable, it is a matter of how much workers need to worry about how they are going to cope in their retirement.

Assurances by Premier Sean Chen that the government “takes ultimate responsibility” for state pensions is encouraging, but note that he qualifies this with: “if we cannot find a solution to the labor insurance issue having exhausted all other avenues.” By “other avenues” he is presumably referring to increasing contributions, reducing payments and adjusting the base for calculating average insurance salary. In other words, trying to solve the LIF bankruptcy crisis by taking more in revenue and handing out less in return, which means eating into the pensions of people contributing to the fund today.

The government needs to take responsibility for more than being a guarantor of last resort: It needs to create the circumstances in which people working today can retire safe in the knowledge that they will be taken care of. If the system is to be reformed, it should be to move from a position where the poor support the poor to one in which everyone in society supports each other. Targeting military personnel, public school teachers and public servants, or talking of preventing the previous generation from taking from the current generation’s pension contributions, misses the point.

One way to deal with this is to establish a compulsory national pension fund and to calculate contributions based upon total household income. Another possibility would be to keep the current labor insurance system, based on the nature of an individual’s employment, but to change the National Pension Fund to be a pension fund for all citizens, financed by government tax revenue. Then Taiwan would have a system capable of redistributing wealth properly. This would be the way to solve the problem of workers’ pensions.

Ho Yen-tang is a sponsor of Raging Citizens Act Now.

Translated by Paul Cooper

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