The government will not hesitate to act if the new labor insurance pension system goes in the red 19 years from now, Council of Labor Affairs (CLA) Minister Wang Ju-hsuan (王如玄) said.
“It is just conjecture that the labor pension fund risks incurring debts 19 years after the system takes effect,” said Wang on Friday.
Noting that the assumption was based on hypothetical scenarios — such as up to 80 percent of wage earners choosing to receive monthly pension payments and the pension fund’s return on investment being 4 percent or less — Wang said this depressing forecast might not necessarily be correct.
“There are many variables to decide the future of the labor pension fund, so we need not be too pessimistic,” Wang said, adding that if the fund did begins to incur deficits, the government would enact bailout measures.
Wang’s assurances came after the Legislative Yuan approved a package of amendments to the Labor Insurance Act (勞工保險條例) that will allow the country’s 8 million-plus wage earners to receive pension payments in monthly installments rather than in one lump sum.
Under the existing system, retired wage earners can only receive their pension in a lump sum, the value of which risks being eaten up by inflation and failed investment.
The new system, which will come into force on Jan. 1, will permit retired workers from the age of 60 on to choose to collect their pension in a lump sum or to receive monthly payouts until death.
Wang encouraged wage earners to choose the monthly payout system, which she said would benefit pensioners far more than the lump sum alternative.
“For pensioners who opt for monthly payments, the amount they receive after eight years and one month will outstrip the amount they receive in one lump sum,” Wang said, adding that if a pensioner died and the accumulated monthly amount received is lower than the lump sum, the surviving family would be given the difference.
Also, the insurance premium rate would be raised from the current 6.5 percent to 7.5 percent initially, increasing year by year to a maximum of 13 percent by 2027.
Pensioners opting for monthly payouts will receive an amount equaling the number of years they have participated in the labor insurance system times their monthly salary (calculated by taking the average of a worker’s 60 highest monthly salaries) times the income substitution factor of 1.55 percent.
A retired worker with a monthly insured wage of NT$43,900 would be entitled to receive a pension of NT$20,414 per month after being in the system for 30 years.
Stressing that the main purpose of the new system was to enable workers to lead dignified lives after retiring, Wang said the increase in the premium rate was necessary.
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