The Legislative Yuan on Friday passed bills to revamp pension schemes for civil servants and public school teachers newly employed from the middle of next year, allowing them to have more direct control over their nest eggs.
The draft bills were passed after multiple rounds of negotiations by party caucuses since being introduced by the Cabinet and Examination Yuan earlier this year, with the major sticking point whether the new rule would cover existing public workers who wish to enroll in the new program.
However, the caucuses reached a consensus on Friday, deciding to leave the bills the way they were introduced so only individuals newly employed from July 1, 2023 will be eligible.
In contrast to the current system, the bills require public workers to make contributions into individual accounts, instead of a common pension fund, with a defined level of contributions, rather than benefits.
Monthly contributions will be set at 15 percent of a person's insured salary, of which 35 percent is contributed by the individual and 65 percent by the government.
For example, a person earning a monthly insured salary of NT$40,000 (US$1,412) would have a monthly contribution of NT$6,000, of which they would pay NT$2,100 (35 percent) and the government NT$3,900 (65 percent).
The individual can also choose to contribute more, with the addition capped at 5.25 percent, according to the new rules.
The bills, the latest step in a years-long effort in Taiwan to reform a debt-ridden public pension system, will give public workers more control of their personal finances, the Cabinet has said, by allowing them to choose from a range of investment plans based on their level of risk tolerance.
The Cabinet has also said the change from defined pension benefits to defined contributions is necessary for the stability of the public pension system.
However, since the reform will result in less money going into the pension fund (from workers covered by the new scheme), budgets are to be allocated annually to fill the gap, so the benefits of current public workers and retirees are not adversely affected, according to the bills.
Most notably, the mandatory contribution of 15 percent in the bills is more than double the 6 percent contribution required under Taiwan's Labor Pension System, which covers workers in the private sector.
Source: Focus Taiwan News Channel