Abstract

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.  

Keywords

pensionautomative enrollmentlife-cycle fundbehavioral economics