Labor-Insurance Retirement Payment Changed Into Annuity Program

Taipei, July 18, 2008 (CENS)--The Legislative Yuan passed the revised "Labor Insurance Statute" yesterday (July 17) transforming the retirement payment of the insurance from lump-sum payment to annuity payment, a change meant to give better protection for the lives of the nation's 8.8 million laborers after their retirement.

The revised statute sets the income substitution rate for the annuity payment at 1.55%, as a result of which retired laborers are entitled to 1.55% of their average insured pays before their retirement (with the maximum calculation period reaching 60 months) per month for the remainder of their lives.

To finance the payments, the insurance premium rate is set at 7.5% in the first two years for the new system, rising to 8% in the third year and the maximum 13% in the 19th year. Employers will have to bear considerable extra outlay, since they have to pay 70% of the premium for their employees.

The annuity program was conceived 15 years ago and has been finally enacted, thanks to the effort of eight chairpersons of the Council for Labor Affairs. It is scheduled to kick off on Jan. 1, 2009.

Existing insured laborers can choose between the original lump-sum payment and the new annuity program, but new insured laborers in the future can only take the annuity program, unless he/she retires with less than 15 service years.

Retired laborers can collect much more payment under the annuity program than the lump-sum payment in most cases and the longer he/she lives the higher payment he/she can collect. A retired laborer with 30 years of service years and average insured pay of NT$30,000, for instance, can collect a total of NT$3.9 million for the average 22 years of retired life from the annuity program, NT$2.49 million more than the lump-sum payment. Total annuity payment will exceed lump-sum payment, so long as the retired life tops eight years.