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Thu, Aug 23, 2001 - Page 2 News List

Council to propose changes in pension law

RETIREMENT The Council of Labor Affairs has some new ideas for overhauling Taiwan's pension system, but experts say the proposals won't go anywhere soon

By Chuang Chi-ting  /  STAFF REPORTER

The Council of Labor Affairs is planning to propose changes to the nation's pension laws at this weekend's Economic Development Advisory Conference.

The goal is to give workers greater ability to switch jobs over their lifetimes, and to allow employees to take their pensions with them.

Under current rules, employees are required to work for a single company for 25 years before receiving a pension. Or, they must work for 15 years for a single company and have reached age 55.

Because few workers spend a lifetime with a single employer, labor activists say the nation's pension rules should be changed.

In addition, few employers contribute to company-run pension funds because the penalties for failing to comply with the law are light.

Under the labor council's proposal, employees will have the choice of two systems.

The first is an individual retirement account, into which employers would be required to deposit 6 percent of their workers' monthly salary. The money could be invested in assets such as bonds, equities or certificates of deposits -- though no specifics have been decided.

When the worker reaches retirement age, he or she can withdraw from their fund their contributions plus investment returns.

The other retirement vehicle is called an annuity, although it resembles more a socialist wealth redistribution program.

All the participants in the program would be paid the same monthly benefit -- regardless of how much they contributed to the fund over their lifetime.

Employers would be required to deposit 6 percent of their workers' monthly salary into the fund, though that percentage could be adjusted in order to maintain or raise the amount of the benefit being paid to retirees.

Although the council intends to raise its proposal at this weekend's conference, labor experts and representatives say the plan is likely to go nowhere because too many unanswered questions remain with the proposed system.

"I feel that both plans are bound to die because of disputes and the pension system will remain unchanged, which is something employers are rooting for," said Hsin Ping-lung (辛炳隆), research fellow at the Chunghua Institution for Economic Affairs and a participant on the conference's labor panel.

The annuity plan faces the biggest obstacle, as the system is at great risk of going bankrupt if there aren't enough workers to contribute to the program.

In addition, if fewer new workers sign up for the annuity retirement system, retirees would be forced to accept declining benefits.

"Some conservatives in the council worry about the longevity of the annuity system," said Lo Chung-cheng (羅忠政), a representative from the council's labor standards division.

Should the annuity system need more funds to maintain benefit levels, premiums could be raised from the initial 6 percent level.

The proposal stipulates that the government would not be required to contribute to the system in order to ensure that retirees receive a certain level of benefits.

FORECASTING TROUBLE

The main problem in ensuring the success of a socialist-style annuity program is making sure that there is a continuous supply of new workers to contribute to the fund.

Younger workers may see the retirement fund as a generational ponzi scheme, and opt instead to contribute to an individual retirement account.

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