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

21 NTU Management Review Vol. 29 No. 2 Aug. 2019 3. Findings One problem individuals often face with pension plans is not knowing how much to consume and how much to save for retirement and how to select appropriate investment funds. The pension management framework has to be effective, simple, and understandable for participants. Past evidence shows life-cycle investments are very popular. For instance, target-date funds, which are based on participants’ risk preferences and the dates when the workers prepare to retire. For example, a worker who plans to retire in 2020 is recommended to invest a 2020 target-date fund while one who plans to retire in 2050 invest a 2050 target-date fund. In general, the 2020-fund weighs more on low-risk fixed income than on high-risk equities. On the contrary, the 2050-fund weighs more on risky assets than on low-risk assets. The rationale is that old workers are more vulnerable to loss and should be more risk-averse than those who will continue to work for a long time and are tolerant to loss. Since the concept is simple and easily understandable, life-cycle funds could be the default funds in the member-choice management platform of Taiwan’s pension reform. In summary, we find that most pension plans in our sample have the following characteristics: member-choice option, automotive enrollment, and pre-selected default fund. 4. Research Implications The guarantee of investment returns has become a big problem since the Taiwanese government makes a guarantee of two-year deposit returns for all NLPF beneficiaries. If workers make their own choices and lose money, particularly during financial crisis periods, should the government still make guarantees on investment returns? The answer should be “NO” from the standpoints of academics because participants should be responsible for their risk taking. However, from the viewpoints of legislators, the answer could be “YES” to please workers who are also voters. We suggest a framework with two management teams: One is under the BLP management with a guarantee of two-year deposit returns. This government-backed BLP team has managed the NLPF for many years and has a stable performance record. For participants who are highly risk-averse, it could be a good choice to choose the BLP team. A return guarantee would reduce the resistance of workers with strong loss aversion on pension reform. The other is under the management of private sectors without guarantee of returns. Since the private sectors have