Labor insurance premium rate to be raised incrementally: vice president

Taipei-- A draft proposal to reform Taiwan's pension system seeks to incrementally raise the labor insurance premium rate from 9.5 percent to 18 percent over a 10-year period, rather than doing so in one step, Vice President Chen Chien-jen (???) said on Friday.

Chen was speaking at a press conference, held in response to misleading media reports about the draft proposal, which was released on Thursday.

Under the proposal, the labor insurance premium rate will be raised by 0.5 percentage points every year starting in 2018, according to Chen, who heads the Pension Reform Committee under the Presidential Office.

The government will review the reform results in 2023, and if they are deemed unsatisfactory, the premium rate will then be raised by 1 percentage point every year until it reaches 18 percent, he said.

There is no plan to change the existing system in which employees, the government and employers contribute 20 percent, 10 percent and 70 percent respectively to the premium, he said, dismissing as untrue a report saying that employees and employers would each share 50 percent of the premium under the reform plan.

For workers whose insured salary is NT$30,000, raising the premium rate by 0.5 percentage points will mean an increase of NT$30 per month in their share of the labor insurance premiums, he explained.

Meanwhile, the premium hike will increase employers' burden by NT$9.5 billion per year, rather than NT$50 billion as reported by some media, he said.

In addition to raising the labor insurance premium rate, other key reforms laid out by the proposal include ending the preferential 18 percent bank interest rate on pension deposits for public sector employees within six years and incrementally lowering the replacement rate of public servant pensions to 60 percent.

The proposal will be presented to a national conference on pension reform for discussion on Sunday.

Lin Wan-yi (???), a minister without portfolio who serves as deputy convener on the Pension Reform Committee, explained that the preferential 18 percent interest rate was originally introduced to ensure low-paid public sector employees were financially looked after they retired.

Because the salaries of public sector employees were gradually raised starting in 1980, it is now necessary to eliminate the preferential interest rate in order to create a rational pension system, he said.

On the proposed labor insurance premium rate hike, Lin said the adjustment is needed to narrow the huge fiscal shortfall in the program and prevent it from going bankrupt, which is currently expected to occur in 2027 or earlier.

Source: Focus Taiwan News Channel