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90 Taiwan Development Perspectives 2009 system is the decline in population growth. It will entail enormous debt for the next generation and even huge liabilities to the government. In this sense, the actuarial finance system is important. The premium and contributions need to be dynamically adjusted according to the actuarial result. The government should rule out political considerations, especially during election time. The insured have to pay normally. Then there will be no hidden debt. A small number of social welfare organizations have protested that NPI is a mutual-help system for vulnerable people. The pension is available to only those people who are required to participate: i.e., housewives, farmers, and self-employed people. If voluntary participation is permitted, people will have better protection on retirement. If public functionaries, workers and servicemen who are covered by their respective insurance were allowed to sign up for NPI as well, they would increase income replacement after retirement. Then it may become a real universal basic pension. Basic Pension Ultimately, NPI aims to provide universal old age economic security. Taiwan has to strive for providing all the people 65 years old or older with enough support to keep their minimum standard of living. This is in keeping with the spirit of universal welfare state and social security. The NPI program, which was launched in 2008, benefits 3,530,000 of the disadvantaged people. They include unemployed workers, students, housewives and the physically and mentally disadvantaged people. Military personnel, civil servants, and jobholders are excluded. Social welfare groups argue that the program offers a mere small-cale pension scheme. They criticize it as a mutual-help system for the vulnerable people. They insist that the principle of social security is for the rich to help the poor to achieve the effect of mutual assistance, and want a wider participation. They believe the more participants the better. They also fear that the ‘small-scale pension scheme’ runs counter to that principle, wondering how long it will last. NPI leaves out economically advantageous people, such as civil servants, military personnel and teachers. For lack of more contributions, they argue, the program will go bankrupt. Obviously, the administration does not want to face these problems. It is more concerned about whether workers would have a pension and servicemen and civil servants enjoy high-income replacement. The administration believes equality and justice will be lost, if they are allowed to participate in the program. In fact, to include public functionaries, teachers, military personnel and labor in the NPI scheme is to protect their basic civil rights rather than to allow them to have ‘double protection.’ The scheme is supposed to be one for a basic pension, separate from occupational insurance, like the insurance for civil servants, servicemen and labor. The World Bank has suggested a three-tier model of old age protection to resolve the problem of old-age poverty. The government should develop a multi-level system to provide more security for the old. All people should be allowed to sign up for NPI. As the pension only supports retirees to maintain the minimum standard of living, the government needs to encourage people to work. When people are working they are entitled to an occupational insurance. It stands to reason that people shall have more provision in retirement and avoid pension poverty. Taiwan has 8.7 million workers, whose retirement payment is less than 50 percent of income replacement. That is far below 70 percent considered enough by the World Bank to maintain a decent standard of living. The government should encourage labor to sign up for NPI to top up their retirement income. In addition, retired workers entitled to retirement benefits were given elderly welfare subsistence allowances. They lost the subsidies when the NPI program was launched. Nor could they receive pension payment unless they sub-
Establishment of the Pension System in Taiwan 91 scribed to NPI. They would each lose NT$3,000 a month. The responsibility of the government is to protect people's retirement income in real terms. Labor insurance provides meager retirement benefits. Even if the income replacement rate is raised, the retirement payment will not prevent labor from old age poverty. The government shifts the liability of workers’ retirement to employers who have to pay a lion’s share of insurance premiums. If they are required to pay more, their cost of operation will be greatly increased. They may consider passing the added cost to consumers or closing down their businesses. If retirement benefits are raised while the premiums remain the same, the labor insurance may be risking bankruptcy. Either way, workers are not beneficiated. put a resulting increase in outlay at NT$4.3 billion a year. But it is far lower than the elderly welfare subsistence allowances and the old age farmers’ welfare benefits put together. In the long run, this is a win-win policy for the government and should be wholeheartedly supported as such. The worldwide trend is to make retirement security not only the government responsibility but personal obligation as well. Taiwan has to follow the trend, getting prepared to start a universal basic pension. Such a universal system of basic protection is a necessity indeed. All citizens should be encouraged to sign up for NPI to lay the ground for a basic pension, which can truly shield the retirees against poverty. The government wishes to stop paying old age farmers’ welfare benefits after the NPI program got under way. Otherwise, the national treasury will add more than NT$2 trillion to public debt over the next 40 years. On the other hand, the NPI Act does not provide for penalty. It is difficult to stop paying farmers’ welfare benefits while they are free to sign up for NPI. Besides, it is also difficult for the national pension to pay the welfare benefits. (Should all old farmers be given a NT$6,000 subsidy across the board? How can the burden of the national treasury be eased, if the benefits are incorporated in the pension?) In fact, the solution seems simple. All that the government has to do is to let NPI evolve into a basic and universal pension. Only new farmers are required to participate in the NPI program. The pension right of farmers is guaranteed and the payment of welfare benefits can be terminated in due time. If allowed to subscribe to NPI freely, the number of participants will increase by eight million. When they all sign up, more than half of the insured will contribute and the government does not have to pay subsidies. In other words, the more people join the more stable the NPI system will be. Moreover, people will have more confidence in the government. One estimate
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CONTENTS Preface Overview ix xi Foc
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Agriculture and Fisheries Impact of
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CHUANG, Yih-chyi( 莊奕琦 ) Pro
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TAN, Ching-yu( 譚瑾瑜 ) Associ
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enth effort on the part of the Foun
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ills pertinent to parliamentary ref
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