Taiwan’s largest pension plan to introduce member choice option
09 July 2013
By Hui Ching-hoo
Taiwan’s largest pension, the Labor Pension Fund (LPF), is preparing to launch a member choice platform following initiatives set out by a special committee formed by the Financial Supervisory Commission (FSC) and Labor Pension Fund Supervisory Committee (LPFSC) on July 1, according to a report from Commercial Times.
Based on the proposal, employees will be expected to fork out an additional 6% in voluntary contributions if they want to participate in the member choice plan. The authorities have granted a tax break to lure more employees into the programme. The target for voluntary contributions is set to be approximately NT$7 billion (US$230 million) a year.
Members will be able to access information relating to their contributions and select their mandates through the member choice platform via the Bureau of Labor Insurance (BLI). The special committee will also analyse the scope of fund products to be made available to scheme members.
FSC Vice Chairperson Jennifer Wang says the first batch of member choice products is expected to come online by the end of this year.
Donna Chen, managing director of Keystone Intelligence in Taiwan, tells Asia Asset Management that the scheme can transfer part of the investment risk of the pension system from the government authorities to employees.
“However, the LPF will have to overcome several obstacles before it can launch the scheme. For example, some labour unions are opposed to it based on fears that member choice products will not be able to provide guaranteed returns. Also, defining the criteria for the products to be included in the member choice platform will be very complex,” she adds.
The LPF had total AUM of NT$1.56 trillion as at end of May 2013.
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