National Pension System to Take Effect on Oct. 1
The China Post
September 30, 2008
The national pension system will be officially put into practice on Oct. 1, creating a social security mechanism for those who currently lack any pension benefits, but lawmakers are afraid that the system might go bankrupt within one and a half years due to lack of supporting funds.
The Legislative Yuan passed the National Pension Act on July 13, 2007, making it possible for people aged 25 to 65 who are not covered by military, civil service, teachers or labor insurance programs, as well as farmers under the age of 65, to join the program.
The new system will cover an estimated 3.53 million people, including the jobless, street vendors, housekeepers, naturalized foreign spouses and students older than 25.
The premium rate for the insurance is 6.5 percent of the minimum monthly wage of NT$17,280, for the first year, and will be increased by 0.5 percent in the third year and thereafter by 0.5 percent every two years until it reaches the limit of 12 percent.
Insured people must pay 60 percent of the premium, while the central competent authority will be responsible for the remaining 40 percent, according to the Bureau of Labor Insurance under the Council of Labor Affairs.
Given the current minimum wage of NT$17,280, a monthly contribution of 6.5 percent of the minimum wage would amount to NT$1,123, of which a citizen will pay 60 percent, or NT$674, per month, while the government will cover the remaining 40 percent.
Under the regulations, an insured person who pays a monthly premium of NT$674 for 40 years will receive NT$8,986 every month from the age of 65 — the standard retirement threshold — until death.
After 40 years, the total amount contributed by the citizen would be NT$515,082, while the payout would amount to NT$1.83 million over 17 years, calculated on an average lifespan of 82 years.
In related news, the Budget Center of the Legislative Yuan said that the earnings allocated from the welfare-oriented lottery business to finance the implementation of the National Pension System are expected to amount to only NT$31 billion by the end of this year, sufficient enough to support the national pension system only for one and a half years.
Accordingly, lawmakers said if the government fails to raise the business tax by one percent as allowed in the National Pension Act, then the national pension system would be caught in financial straits.
The Ministry of Finance estimated that if the business tax rate is raised by one percent, then an additional NT$45 billion tax revenue a year will be able to support the national pension system.
But once the tax rate is hiked, then it is surely to be passed onto consumers, making them suffer increased costs.
On another front, the Ministry of the Interior, the competent authority for implementing the national pension system, said after the system is put into practice, the government will certainly “keep the ball rolling.”
Officials with the MOI said the government can legally appropriate an expense budget to support the implementation of the national pension system even if it decides not to raise the business tax rate.
According to the National Pension Act, funding for the subsidized premiums and related expenses should be appropriated by the central competent authority. Apart from annual budget, the surplus from the public welfare lottery for the national pension and an increase of business tax by 1 percent could also contribute to the available funds.
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