Tung, C. C., Lin, A., and Lee, G. 2019. A Study of Member-Choice Management Platform for Pension Funds. NTU Management Review, 29 (2): 1-28. doi:10.6226/NTUMR.201908_29(2).0001
Chan-Chuan Tung, Department of Finance, National Chung Hsing University
Anchor Lin, Department of Finance, National Chung Hsing University
Grace Lee, Pension Fund Association, R.O.C.
In order to strengthen the performance of Taiwan’s New Labor Pension Fund, this study reviews the pension-related literature and investigates the reform experience in selected developed economies. We suggest a member-choice management platform with the following characteristics: one pension account only for every employee for management convenience, a management structure offering both private services and government services with a guarantee of two-year deposit returns, automotive enrollment with a default savings rate of 3% and automotive escalation linking saving increases to pay increases, raising the savings rate limit from 6% to 12% with no tax benefit for savings above 6%, and target date funds as the default funds by applying life-cyle investment theory to make asset allocation for employees with different retirement dates. Thaler and Benartzi (2004) apply the nudge concept in behavioral economics to design a pension management program, called Save More Tomorrow (SMT). Our suggestion is to take the SMT program as reference when we design Taiwan’s member-choice management platform since SMT has significantly increased both pension enrollment rates and savings rates in developed economies.
pensionautomative enrollmentlife-cycle fundbehavioral economics