Sun, May 05, 2013 - Page 8 News List

Backing the right pension system

By Edward Wu 吳明儒

For example, the public-sector pension system allowed people who wanted to change their profession and move into the private sector to opt for a reduced pension and leave their job, and the scheme, earlier.

In the same way, encouraging professional mobility will make it easier for citizens in different professions to change jobs and gravitate to jobs and sectors that better suit their skills and requirements, and this will improve work efficiency and increase production capacity. This approach is based more upon the logic of addition.

Unfortunately, at the time of writing, plans to establish a “portability” pension system, in which accumulated qualifying years are transferable from one profession to the next, have largely been neglected.

In addition, many NGOs promoting the rights of workers with low incomes are advocating the creation of a universal pension fund providing for everyone, regardless of profession, because at present the national pension fund is no more than a form of social welfare for non-workers.

They want this national pension fund to be incorporated into a universal pension fund to be handled by the proposed national pension bureau that is to fall under the future department of health and social security. However, little is to come of this in the current reforms.

By comparison, as part of the 2007 state pension reforms carried out in South Korea, a mother stands to receive 12 months of additional pension points when she gives birth to a second child, and up to another 18 months if she has three of more children. In this way, the pension reform actually encourages families to have more children, and therefore an increase in the birth rate.

This wave of pension system reforms has failed to put any pro-active plans in place to address Taiwan’s current demographic trends of the low birth rate and aging population. It does not make sense to make savings today if we are not continuing to be productive tomorrow. No matter how much we save, and how much healthier the pension fund becomes, if nobody is actually being productive further down the line it will do us little good. Therefore, a pro-active pension system is needed, not some simplistic attempt to address the poor pension fund finances.

Success or failure of the social insurance pension system reforms rests on more than whether a solution can be found for the looming bankruptcy of the fund 20 years down the line. If it were that simple, it would just be a case of outsourcing social insurance to the private sector, and yet no advanced nation has opted for that type of reform.

On the other hand, a combination of state and private pension schemes has already become a popular model for pension reform in these countries. According to the Social Europe study, pension reforms attempting cutting state pensions and private pension plans have foundered.

Social insurance needs to be in the public interest, and thus needs to have prospects for the future.

This is no time for short-termism. In addition, the pension system needs to be a generational contract, backed by state intervention, a social contract similar to the marriage vows made between the bride and groom at their wedding: “Do I, the worker, take this labor insurance as my rock and shelter, and from this day forward, in the pension fund’s financial sickness and health, for better or for worse, promise to pay high insurance premiums and remain faithful to the principle of social insurance, till retirement do us part?”

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