Old Pension System Retirees Can Transfer Accumulated Funds to New System Account Early Without Affecting Seniority or Paid Leave

(CNA) Taipei, July 2, 2023 - Laborers under the old pension system will be able to voluntarily contribute to their retirement funds in the future. With mutual agreement between labor and management, they can also settle their old pension funds early and transfer them to a new system account. The Ministry of Labor emphasized today that this will not affect their original seniority or paid leave, and voluntary contributions are tax-exempt, making it a win-win policy.

In Taiwan, employed laborers receive two types of retirement benefits after retirement: old-age benefits from labor insurance, and either old or new labor pension funds.

Currently, there are still 115,000 native laborers solely under the old system. Their pension is calculated based on their years of service: two base units (monthly salary at retirement) for each full year of work, with a maximum of 45 base units for service exceeding 15 years.

Since old pension system laborers' pensions stop accumulating even if they continue working after reaching their years of service requirement, the Executive Yuan today approved the "Voluntary Contribution and Early Settlement of Retirement Funds Plan for Pure Old Pension System Laborers." This plan allows pure old pension system laborers to voluntarily contribute to their retirement funds. Furthermore, pure old pension system laborers who meet the retirement requirements can, with mutual agreement between labor and management, settle their old pension funds early into their new system account during the contract period, allowing participation in the investment and management of the new system fund.

Huang Wei-chen, Director of the Department of Labor Welfare and Retirement Benefits at the Ministry of Labor, stated at a press conference today that the biggest advantages of the new pension system are "principal protection, interest protection, and guaranteed returns." Allowing pure old pension system laborers to make voluntary contributions and settle their pension funds into the new system account with mutual labor-management agreement enables more laborers to share in the stable investment returns of the new pension system fund. It offers a minimum guaranteed return of at least "two-year fixed deposit interest rates," and voluntary contributions are also income tax-exempt.

Huang Wei-chen provided an example: A 55-year-old laborer with a monthly salary of NT$50,000 and 30 years of service has accumulated 45 base units, resulting in an old pension of approximately NT$2.25 million. If this laborer continues to work for another 10 years until age 65, even with an annual salary growth of 1.44% (based on the average annual growth rate of regular wages), their pension would only be around NT$2.55 million.

Huang Wei-chen explained that if this laborer starts making voluntary contributions of 6% of their salary at age 55 and, through mutual labor-management agreement, transfers the NT$2.25 million old pension to the new system account to participate in the investment returns of the new pension system fund, by the time the laborer reaches age 65, with an assumed investment return of 5%, the accumulated pension in the new system account would be approximately NT$4.16 million, a significant increase compared to NT$2.55 million.

Huang Wei-chen also emphasized that although this plan allows pure old pension system laborers to settle their funds early, it does not mandate employers to contribute 6% of the pension for laborers after settlement. The settlement only calculates the pension based on the laborer's years of service at that point in time. The labor contract is not terminated, nor is it a retirement and re-employment scenario. Therefore, it will not affect the laborer's original rights and interests such as seniority and special paid leave.

Huang Wei-chen stated that to allow old pension system laborers to apply the plan as soon as possible, relevant regulations have been announced today with a 7-day public comment period, aiming for implementation by the end of July. (Editor: Li Shu-hua) 0702

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