If your clients and prospects need further persuasion and evidence on why they have to take personal responsibility when it comes to financial planning, instead of just relying on the government and public schemes, the major changes proposed to pension funds in Taiwan is another reminder.
Taiwanese Vice President Chen Chien-jen has announced nine key reforms to the island's pension system, aimed at getting depleting pension funds to last for at least one more generation.
With the reforms, the life of the public servant fund shall be extended to 2044, that of the pension fund for educational personnel shall be prolonged to 2043, and that of the labour fund to 2036, he said. If no changes are made, the pension system could face bankruptcy by 2030, reported the Central News Agency.
The key reforms are as follows:
- Ending a preferential 18% bank interest rate on pension deposits for public-sector employees. The preferential rate will be gradually lowered to 0% within six years after the new measure goes into force.
- Lowering the replacement rate of public servant incomes gradually to 60% from the current 95%.
- Extending the insured salary payment period that is adopted as the basis for calculating pension payments.
- Increasing the retirement age.
- Raising the ceiling for labour insurance premium rates to 18%.
- Injecting government funds into the pension fund to secure financial sustainability for the pension system.
- Allowing employees to carry over their working years, upon which pensions are calculated, when they move to a different job.
- Improving pension fund management to a professional and transparent level and increasing investment efficiency.
- Eliminating all the unreasonable aspects of the current system, such as one that benefits certain groups of the insured more than others.
Mr Lin Wan-yi, deputy convener and chief executive of the Pension Reform Committee under the Presidential Office, said that these will be the first stage of reform to the pension system. "There will be a next stage of reform in the next five or 10 years," he said.