Labor Insurance may go bankrupt during Lai Qingde’s tenure! “Pay less and receive more” has become an international spectacle. Four major solutions to pension reform will prevent young people from shouldering generational debts.

Written by: Editor of Today’s Weekly

According to the labor insurance fund actuarial report released by the Labor Insurance Bureau, as of 2023, the hidden liabilities have soared to more than 13.04 trillion yuan, a nearly 20% increase from four years ago. The financial black hole is expanding at an alarming rate.

In fact, the labor insurance fund has been unable to make ends meet since 2017, and the annual premium income is not enough to cover benefits. If the government does not make any reforms, the labor insurance fund will go bankrupt in 2028—that is, it is likely to come to an end under the new president Lai Ching-te.

In fact, if you look at the various labor insurance benefit formulas and compare them with the standards of advanced countries, you will be surprised to find that Taiwan’s annuity benefit standards are too loose.

Judging from the benefit rate that the people are most sensitive to, according to a 2022 survey by the Organization for Economic Cooperation and Development (OECD), the income replacement rate in Japan and South Korea is only 32% and 31% respectively, and that in Germany and the United Kingdom is about 40%. At the same rate Looking at Taiwan, the income replacement rate exceeds 63%, and the rates paid are not as high as those in countries such as Germany, Japan, and the United Kingdom.

What Taiwan lacks in promoting labor insurance reform is not a plan, but the determination of those in power, the cooperation between the government and the opposition, and the consensus of the people. In previous reform plans,Overpayment, underreceipt, delayed refund, government subsidiesare all basic recipes.

“Delaying retirement has become an international trend!” Deng Mingbin, former director of labor insurance and deputy CEO of the Occupational Disaster Prevention and Reconstruction Center, pointed out that Taiwan will raise the legal claim age for labor insurance to the upper limit of 65 in 2026. He believes that it is still There is room for deferral, but the reform must be accompanied by pragmatic support. The government must first create a workplace that is friendly to older workers before it can support the annual reform and defer retirement.

Currently, Taiwan only uses the best 5 years of insured salary as the benchmark for calculating benefits. Compared with advanced countries, which almost use lifetime insurance coverage, sometimes the best 25 or 35 years are used. Taiwan’s standards are a wonder of the world. The most reasonable way is to calculate the salary during the lifetime guarantee period. However, compared with the current system, the scope of the reform is too large. Perhaps the 180 months version of Ma and Tsai’s version would be a more feasible approach.

As for the most controversial “cutting benefits”, the current 1.55% seniority benefit rate is obviously too high. However, in reality, the average monthly claim amount for the labor insurance elderly benefit in 2023 is less than 19,000 yuan. Xin Binglong, associate professor at the National Institute of Development Studies at National Taiwan University, pointed out the key point: Taiwan’s maximum insured salary has been locked at NT$45,800 for a long time, and high-income earners are unable to declare truthfully, resulting in low payment amounts.

Xin Binglong believes that under this premise, no matter how reforms are implemented, the impact on high-paid workers will be limited, while disadvantaged workers will have to pay a greater price. He suggested that insured wages should be raised by several levels to allow high-income earners to contribute more premiums and expand the fee base; however, for the portion of the increase, the income replacement rate would be regressive and benefits would not increase proportionately.

Next, when it comes to the discussion of rate increases, many experts invariably put forward the concept of old debt and the division of old debt when analyzing the new adequate rate. To put it simply, if the new rate is adjusted to 16.27% in the future, new financial institutions will only need to deal with new payment rights, and no new liabilities will be incurred in the future, and debts that have not been withdrawn in the past can be frozen.

“We need to rebuild the confidence of the younger generation in the system and tell them that every penny they pay now is for their own future benefits, rather than shouldering the debts of the previous generation.” Associate Professor of the Department of Social Work at National Taiwan University and member of the National Pension Reform Commission Fu Congxi said.

How does it work in practice? Fu Congxi gave an example. Assuming that the worker is now 40 years old and a new rate is adopted after the reform, the pension payment for retirement at the age of 65 in the future will remain the same as the old formula for seniority before the age of 40, and a new payment formula will be adopted for the new seniority, which will be processed in segments.

However, the outside world also has doubts about this idea, believing that after the reform, new premiums will no longer cover past liabilities, which may accelerate bankruptcy. In this regard, Xin Binglong also agrees with freezing old debts, but believes that new insurance companies still have to share part of the old debts. In addition to self-sufficient balanced rates, it may be feasible to bear an additional 2% or 3%.

The labor insurance bankruptcy crisis is looming in front of us. In the face of pension reform, Ma Ying-jeou once said, “If you don’t do it today, you will regret it tomorrow.” He left the labor insurance bomb with a ticking countdown to his successor. He once said, “If you don’t do it now, you will regret it soon.” ” Tsai Ing-wen will also hand over the reins of office. In 2024, Lai Qingde will take over the important task of bomb disposal. What will he do in the future? The whole nation is watching with eyes wide open. For more information, please refer to the latest issue of “Today’s Weekly” (Issue 1427)

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