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

A Study of Member-Choice Management Platform for Pension Funds 22 to win the business from participants, the market competition would bring in the best teams and lead to better investment performance. Surely, participants who choose private sectors should understand that risk and return are positively associated. The other problem is the issue that many workers have no expertise in choosing suitable funds for their pensions. Therefore, the design of default funds is crucial for the success of pension reform. Empirical evidence shows that the target-date funds became the most popular option among various fund families because the concept of life-cycle investment is simple, understandable and inexpensive to implement. Target-date funds could be selected as the default funds if workers have no expertise in investments or if they procrastinate and behave with status quo biases. In summary, these two problems could be solved by providing an option of guarantee returns and a default of target-date funds for those who have difficulties making their own choices on pension plans. 5. Conclusion and Contribution In order to enhance the performance of NLPF and strengthen the economic safety of retirement workers, this study reviews the pension-related literature and investigates the reform experiences in selected developed economics. Thaler and Benartzi (2004) apply the concepts in behavioral economics to design a pension management program, SMT, which has significantly increased both pension enrollment rates and savings rates in several reform pension plans. The SMT concept could be very useful for Taiwan’s pension reform. We suggest a member-choice management platform for Taiwan’s NLPF 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 default funds by applying life-cycle investment theory to make asset allocation for employees with different retirement dates.