臺大管理論叢 NTU Management Review VOL.29 NO.2

Financial Effects and Intergenerational Inequity of Pension Reform in Taiwan 166 2.4 Retirement Benefit and Actuarial Assumptions In Taiwan, a labor worker enrolls in two pension systems. In labor insurance, the monthly benefit he can receive after retirement is determined by the average of the individual’s highest 60 months of salary times 1.55% times service years. The labor insurance contribution rate is set to be increased by 0.5% every 2 years from 9% to 12%. The employee, employer, and the government account for 20%, 70%, and 10% of the contribution, respectively. In the labor pension scheme, employers must contribute 6% of their monthly salary into their defined contribution accounts. The employees may also choose whether to voluntarily contribute up to an additional 6% of their monthly salary into their defined contribution accounts. For civil servants, they also enroll two pension systems that are composed by the government employee insurance and the civil service pension fund. The monthly salary for civil servants include basic pay, seniority pay, and supplementary pay. After retirement, the civil servant can receive a lump sum retirement benefit from the government employee insurance. In addition, a civil servant can also receive a monthly benefit which will be determined by the formula: the month’s basic pay × 2 × 2% × service years in the civil service pension fund. For the government employee insurance, the contribution rate is 8.83% of the monthly salary, and the civil servant and the government account for 35% and 65% of the rate, respectively. For the civil service pension fund, the contribution rate is about 12% of the monthly salary, and the civil servant and government account for 35% and 65% of the rate, respectively. For actuarial assumptions, we assume that an individual starts to work at the age of 25 and works for 35 years. The life expectancy assumption for the individual follows the latest labor retirement fund actuarial report and the 2013 abridged life table in the Republic of China area. For the assumption of the underfunding liability discount rate, we adopt the 30-year Taiwan government bond coupon rate (1.64%). For the pension funds investment rate of return, we assume the rate of return is 3%. 3. Findings and Conclusion Our results reveal inconsistent pension benefits between occupations in the pension schemes, but the differences are not as noteworthy as the public imagined. However, the intergenerational inequity between generations in the pension system differs substantially.