Critical pension reforms demand spirit of sacrifice

Ultimately, the survival of any insurance system depends on its stability as a guarantor of financial safety for its participants, or else the system is little more than a Ponzi scheme bringing disaster on an unfortunate group of people at an uncertain point in time, after previous participants have exhausted the pool of hard-earned savings. Retirees' pension systems in Taiwan consist of military insurance, public servants' insurance, labor insurance and national insurance, among others, for those not covered in the previous groups. Of the systems, labor insurance is the largest, affecting approximately 9 million people.

Perhaps top among the concerns is the income replacement rate of monthly stipends that a retiree becomes eligible for. This rate means the percentage of original working income.

Right now, the labor insurance fee is currently 8.5 percent of monthly wage (scheduled to rise gradually to 12 percent by 2026). Of the fee, the government contributes 10 percent, the worker 20 percent, and the employer 70 percent.

One of the proposals being reported by media is changing this key variable in the calculation for labor insurance retirees' monthly stipends. Currently the stipends are calculated based on the average of a pensioner's highest five years' income. On Jan. 23, a UEN report said that the most probable adjustment would be taking the highest 15 to 20 years of income value, a change that will lower the average.

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