Establishment of the Pension System in Taiwan

Introduction

Taiwan has tried to establish a sound social welfare system since 1950. A safety net has been provided for most of the people but some of them – housewives, the unemployed, mature students and some retirees – were left out. Many lacked support after retirement, in particular. A national pension scheme was needed.That scheme was finally set in place in the year 2008.The national pension system was established.

This paper discusses issues of income security of the aged. It reviews important developments of the social welfare system in Taiwan and its fast aging society.Efforts are made to explain why and how the national pension system came into being.Attempts are also made to probe the future of that system.

History of the Development of Welfare and Pension Systems in Taiwan

Taiwan took the first significant social welfare measure in the year 1958. It was a golden year, which witnessed the legislation of the Factories Act, the Factory Inspection Act, the Minimum Wages Act, the Labor Contract Act, the Workers’ Welfare Benefits Rules, and the Labor Dispute Solution Act. (See Table A.) Also, a labor insurance scheme was officially started, providing protection for workers ever since. Benefits include payments for injury, disability, childbirth, death and old age. Taiwan’s labor insurance, started 75 years after Germany, ushered in a new era of social insurance.

Another important year is 1980. A series of laws were adopted.They included the Old Age Welfare Act, the Handicapped Welfare Act, the Social Assistance Act, and the Private School Staff Insurance Rules. They paved the way for many laws to come. For instance, the Old Age Welfare Act provided the basic protection for the elderly when Taiwan became an aging society in the late 1990s. The Handicapped Welfare Act evolved into a Disabled People Protection Act. The Social Assistance Act has been invoked to provide emergency aid and service for the poor.

Still another important year is 1994.Taiwan launched national health insurance. It is Taiwan’s first general and mandatory social insurance.

The fourth, and probably the most, important year is 2008 which saw the inauguration of national pension insurance (NPI). Started on October 1, NPI provides an “annuity” for the people of Taiwan. (The NPI Act was adopted in 2007.) NPI is different from a pension system in other countries. In Taiwan, NPI is neither universal nor fully mandatory. It now only shields people who are not participants in employment-related insurance, in particular the labor insurance coverage. These people include housewives, students, and the unemployed who are apparently not employed by anyone under any circumstances and definitely have no stable or sustainable income at all. The government shares the finical burden in a much higher ratio than the employment-related insurance. In addition, on August 13, the Labor Insurance Act was amended to end lump-sum payment in favor of an old age pension system. It is believed that the latter provides more and better economic security for participants.

As Taiwan is aging fast, poverty of the elderly is a problem that needs to be addressed. Western European countries have continued their pension reform. Some have reduced public spending for pension, encouraging people to sign up for private annuities. Others have raised the mandatory retirement age.

Taiwan falls far behind the Western countries in the protection of its elderly population. A basic universal pension system that can provide for all retirees has not yet been established. And the risk of aged people falling below the poverty line is increasing because of the economic slowdown in Taiwan, while the pressure of inflation grows. The elderly account for more than 10 percent of Taiwan’s population. At the same time, because retirees increase in number, its workforce is shrinking rapidly. The burden of the working population to care for the aged will become heavier as years go by.

Consensus should be reached on how to cope with the problems of poverty in the old age and/or after retirement as soon as possible. Moreover, efforts should be redoubled to establish a comprehensive financing plan to back up a basic universal pension protection system lest Taiwan should face a financial crisis triggered by a similar pension scheme in the United States and Europe. It is also recommended that the government reexamine its policy of subsidizing the needy.The government should aim at building a sustainable pension system for the aged.

Table A

Social Welfare Legislation and Policies in Taiwan

Year	Social welfare legislation	Social welfare programs, measures
Before 1949	Factories Act, Factory Inspection Act, Minimum Wage Act, Labor contract Act, Workers’ Benefits Rules, and Labor Disputes Handling Act	1947 Department of Social Affairs, Taiwan Provincial, set up
1950		Servicemen Insurance and Labor Insurance launched
1952		Veterans Affairs Commission, Executive Yuan, R.O.C. set up
1953	Army, Navy and Air Force Servicemen Insurance Rules
1958	Labor Insurance Rules, and Civil Servants Insurance Act
1963		Assistance of children service program from the Children's Fund of the United Nations
1964		Social policy of Present Stage for the Principle of the People's Livelihood
1965		Social Welfare Fund set up
1966		Strengthening Social Welfare Measures of Provinces and Cities (Phase I)
1967	Social Assistance Investigation of Taiwan Province Law
1968	Labor Insurance Rules (amended)	Community Development Eight-year Plan for Taiwan Province, and the Outlines for Community Development Program
1969		Outlines for present social construction program
1970		Four-year community development plan for Taipei City, Ten-year community development plan for Taiwan Province
1971		Strengthening Social Welfare Measures of Provinces and Cities (Phase II)
1972		Plan for Family Well-off Plan to Re-construct the Poor and Disabled
1973	Children’s Welfare Act, and Labor Insurance Rules (amended)	Plan for Health and Wealth
1974	Occupational Safety and Health Act, and Civil Servants Insurance Act (amended)	Strengthening Social Welfare Measures of Provinces and Cities (Phase III)
1975	National Housing Rules, and Factories Act (amended)	Asylum Plan for the Impoverished Mentally Ill, and Program for Improving Present Social Welfare Services and Assistance
1978		Strengthening Social Welfare Measures of Provinces and Cities (Phase IV)
1979	Labor Insurance Rules (amended)	Measures for Reforming Current Social Work, and Plan to Initiate Social Workers System in Taiwan Province
1980	Old Age Welfare Act, Handicapped Welfare Act, Social Assistance Act, and Private School StaffInsurance Rules
1981	Implementation Byelaws for Old Age Welfare Act, Implementation Byelaws for Social Assistance Act, and Insurance Rules forDependents of Public Servants	Community Development Plan in the first five-year period in Taiwan Province
1982	Compulsory School Rules, Implementation Byelaws forChild Welfare Act
1983	Vocational Training Act	Program to Strengthen Infrastructure of Grassroots Level, and Program to Increase Farmers’ Income
1984	Labor Standards Act
1985		Health Insurance for Retired Civil Servants and Their Spouse, Health Insurance for Private School Staff and Their Spouse, and Farmers’ Health Insurance
1987	Implementation Byelaws for Civil Servants Insurance Act
1988	Juvenile Welfare Act, and Labor Insurance Rules (amended)	Outlines for Present Labor Policy, and Plans for the Elderly in Taiwan Province – Welfare Measures for CaringSenior Citizens
1989	Farmers’ Health Insurance Rules	Implantation Project of Cooperatives to Supply Daily Necessities for Civil Servants
1990	Handicapped Welfare Act (amended), Employment Service Act, Implementation Byelaws for Farmers’ Health Insurance Rules, and Labor Standards Act (amended)	Six-Year National Development Plan
1991	Occupational Safety and Health Act (amended), Disable People Health Insurance Scheme, Helping Nursery in Taiwan Province Scheme, and Implementation Byelaws for HandicappedWelfare Act	Six-Year National Development Plan - National Health Insurance, Outlines for Work of Community Development, Implantation Program for Emergency Life Aid of Unfortunate Women in Cities and Counties of Taiwan Province, and Management Rules for Funeral Facilities of Taiwan Province
1992	Employment and Welfare Act, Points to Help Abandoned Baby in Taiwan Province, and Implementation Points of Community Activities for Classroom of mother	Work Program for Present Community Development in Taiwan Province, Work Program for Children, Juvenile and the Old Health Care in Cities and Counties in Taiwan Province, and Program for Society Peace in Taiwan Province
1993	Children’s Welfare Act (amended), and Old Age Welfare Act (amended)
1994	National Health Insurance Act	Outlines and Implementation Program for Social Welfare Policy
1995	Byelaws for the National Health Insurance Act, Handicapped Welfare Act (amended) Child and Youth Sexual Trade Prevention Rules, and Labor Insurance Rules (amended)
1996		Women's Welfare Aids in Cities and Counties of Taiwan Province
1997	Sex Crime Prevention Act, Social Worker Act, Physically and Mentally Handicapped People Protection Act, Social Assistance Act (amended) - first reading, and Old Age Welfare Act (amended)
1998	Domestic Violence Prevention Act
2000		Provision of Assistance for Women and Households in Difficulties
2001	Voluntary Service Act
2002	Gender Equality in Employment Act
2003	Children and Youth Welfare Act
2007	Employment Insurance Act (amended), National Pension Act, and Disable People Protection Act (formerly Handicapped Welfare Act)
2008	Labor Insurance Rules (amended) - pension insurance system

Current Situation in Taiwan

There are some developments specifically important to the enforcement of the pension system. They may have serious impacts.

1.A rapidly aging society

The 21st century is the century of the elderly. In June 2006, a census report, Population Estimation between 2006 and 2051, was published by the Human Resource Planning Office of the Council for Economic Planning and Development. It forecasts that the aged would account for 10.72 percent of Taiwan’s population by 2011.By 2026, they will make up 20 percent and are expected to account for 30 percent in 2040.The figure will rise to 36.98 percent by 2051. The Report also points out the change of the aged population in relation to the young population. It projects the elderly to outnumber those under 15 years of age (who will account for 12.72 percent of the population) for the first time in 2017. By 2051, the elderly will number 4.7 times that of the minors below 15 years of age.

According to statistics released by the Department of Household Administration under the Ministry of the Interior, the population of senior citizens in Taiwan had surpassed 1,480,000 as of the end of September 1993. The senior citizens accounted for 7.1 percent of the total population, exceeding the 7 percent threshold set by the World Health Organization for an aging society. By the end of 2002, Taiwan's elderly population surpassed two million. One estimate put the number of the elderly at 2,382,000 or 10.35 percent of the total population as of the end of 2008. In other words, one out of every ten people in Taiwan is an elderly citizen. When the elderly account for 14 percent or more of the total population, Taiwan will become an aged society.

The old-age dependency ratio has tripled since the 1970s. It was about 5 percent between 1951 and 1971. In other words, every 20 working people provided for one elderly citizen. By the end of September 2008, the ratio had risen to 14.27 percent, which means every seven working people should support an old person. Furthermore, according to the Council for Economic Planning and Development, every 3.3 people in the working age shall provide for an elderly citizen in 2026, as postwar baby boomers join the ranks of the aged. By 2051, the ratio is expected to be 1.5 to one. The burden of the working people to take care of senior citizens is getting heavier.

2.Decline in Fertility and Rapid Changes in Family Structure

As a result of industrialization and urbanization, Taiwan’s traditional extended family system is gradually crumbling. Most families are core families now. Besides, the fertility rate is going down. A couple had 3.1 children on an average in 1976. The number dropped to 1.7 in 1986 and 1.18 in 2004, lower than 1.50 among the developed countries and 3.1 among the developing countries. Taiwan has one of the lowest fertility rates in the world. Moreover, the proportion of working people to retirees is also declining. It means that the ability of the community as a whole to support the elderly is on the decline.

At the same time, the ability of a family to transfer its resources from generation to generation has weakened. The deterioration of traditional family values is making the younger generation to shirk the filial obligation of taking care of the parents. Consequently, the government or institutions have to take over the responsibility of providing economic security and nursing care for the elderly. On the other hand, a Ministry of the Interior study shows the majority of old people wish to retire and live with their families. The government needs to promote traditional family values on the one hand, and establish a sustainable national pension system to provide economic security for the elderly on the other. In addition, the government should plan to set a suitable long-term care system and nursing services in place as soon as possible to meet the health needs of the old and accede to their wishes to retire and live with their families.

Old Age Allowance

The Democratic Progressive Party announced a manifesto on elderly pension allowance in the lead-up to local elections in 1993. It called for a monthly cash allowance of NT$3,000 or NT$5,000 per elderly voter. This kind of universal subsidy is a classic representation of “de-commercialization (de-commodification).” It is also a main characteristic of a social democratic institution.

Hsu Hsing-liang, the then chairman of the Democratic Progressive Party, pointed out: “As long as the government is clean and honest, this policy (old age allowance) will not be a heavy financial burden." The then ruling Kuomintang described that policy as “an act of bribery” to win the 1993 elections. Hsu countered by saying the Kuomintang “has bribed (voters) for 40 years, while the Democratic Progressive Party is bribing only this time." Apparently, the Democratic Progress Party was not prepared for elderly pension allowance.It was a campaign promise to win local elections.

The Democratic Progressive Party won in six cities and counties in 1993.The six and the city of Chiayi began paying monthly subsidies in 1994.But a few months later, they asked for subsidization from the central government to continue their old age allowance project.Their request was turned down. Subsequently, these seven local governments either stopped payment or reduced the amount of subsidies for lack of budgeted funds.

Though not lasting, elderly pension allowance was accepted as a policy objective. In 1994, the ruling Kuomintang initiated a low-income old age allowance program. Another program was launched in 1995 to provide welfare allowances for old farmers. Chen Shui-bian was elected mayor of Taipei in 1995.The new Democratic Progressive Party mayor began paying subsidies to physically and mentally disadvantaged residents of the city in September 1996. All of a sudden, the subsidization became the most important welfare issue for political parties in election campaigns.

Chen won the presidential election in 2000. He tried to have an elderly welfare allowance bill adopted. The opposition Kuomintang and social welfare groups did not support the bill.No support was given by the Ministry of the Interior and the Directorate-General of Budget, Accounting and Statistics (DGBAS). They argued that because of financial difficulties and rising unemployment, the new administration should not launch a welfare program which entailed massive funding.

In May 2001, on the first anniversary of his inauguration, President Chen reiterated his determination to pass the welfare act.The DGBAS opposed on the same ground but the Ministry of the Interior made a U-turn, proposing an elderly welfare subsistence allowance bill. According to the bill, people 65 years old or older, except the rich, would receive a monthly subsidy of NT$3,000. An annual outlay for the payment was estimated at NT$16 billion. There would be 440,000 beneficiaries.

The bill was adopted.An amendment to the act was adopted in 2003.The NT$3,000 subsidy was made available also to retired civil servants and teachers, servicemen, and workers who enjoyed old age benefits or received retirement pay. This was a significant policy relaxation and more people benefited. By the end of July 2005, the number of beneficiaries topped 740,000 and the outlay totaled NT$73 billion (with the subsistence allowance payment to elderly indigenous peoples included).

Problems of Old Age Allowance Payment

Before providing national pension insurance, the government offered protection for the elderly, especially those who were not entitled to any sort of retirement benefit. Such protection took the form of subsidies. Subsidization has posed two problems.

1.Increasingly Heavy Financial Burden

The government provided old age subsistence allowance and welfare allowance for old farmers to help those who were not covered by labor insurance or national insurance for public functionaries and servicemen. The funds needed were supported by the government. The burden gets heavier as the elderly population grows. In 2004, the government spent NT$24.19 billion for elderly welfare subsistence allowance, NT$9.25 billion for allowances to low-income elderly people and NT$32.1 billion for welfare allowances for old farmers. The total outlay was NT$65.54 billion. It will go up as the elderly population grows.The financial burden of the government will get heavier. The situation gets worse in an economic downturn. The government has to resort to more borrowing.Public debt will increase.

2.Fairness of Welfare Subsistence Allowance

The elderly welfare subsistence allowance program raises the question of fairness in resource allocation. The Ministry of the Interior insists on excluding the rich from the program. Currently, however, more than 200,000 low-income households are not entitled to the allowance because they are arbitrarily considered “rich.” Furthermore, low-income households can receive NT$3,000 or NT$6,000 in grant a month. Old vulnerable people in these households are also entitled to a special monthly subsidy of NT$3,000. It is clearly breaching the principles of fairness and justice.

Screening of eligible beneficiaries must be fair and objective lest applicants should fear social stigmatization. Difficulties often arise in deciding to award an elderly welfare subsistence allowance or a low income subsistence subsidy. One result is an increase in the cost of processing applications and a possible waste of taxpayers’ money.There is also the difficult problem of funding the subsidization while Taiwan remains in an economic downtown or recession. Probably the only option open to the government is to borrow more money.Public debt will balloon.

Establishment of the National Pension System

The government planned to establish a national pension scheme after the national health insurance program was launched in 1995. The plan was deferred because the financial burden it entailed was regarded as too much for the general public to bear.According to a new timetable, the plan would start in 2000.But a disastrous earthquake occurred on September 21, 2000; and the plan was once again deferred. There was a change of government in 2000 and the plan was shelved.

The new Democratic Progressive Party administration began planning a new national pension system. The Council for Economic Planning and Development (CECD) proposed a national contribution mechanism and a savings insurance system. Both proposals ran counter to the scheme which the Kuomintang administration planned to establish.The Kuomintang wanted a social insurance system. Subsequently, the CECD abandoned the national contribution system because it would impose a huge financial burden on the government. The savings insurance system was given up because of the strong opposition on the part of social welfare groups. After a national social welfare conference was held in 2002, the CECD reverted to the social insurance system. The change of government delayed the establishment of the national pension system by two years.

The Kuomintang proposed its social insurance bill for action by the Legislative Yuan in 2002.The Democratic Progressive Party administration also submitted a similar bill for legislation.The government-sponsored bill did not force farmers to join in the social insurance program. They could choose one of the two programs, farmers’ insurance or social insurance.The former, however, did not provide retirement protection.The Kuomintang version made it mandatory for farmers to be covered by social insurance.The government would pay 20 percent of the premiums, according to the bill it sponsored.The Kuomintang wanted the government to pay twice as much or 40 percent of the premiums. There was a difference in the payment of the bereaved, too.The government mandated lump sum payment, whereas the Kuomintang offered an annuity option.

Dispute

The dispute was over whether farmers should be included as social insurance beneficiaries.There were advantages as well as disadvantages.

1.Advantages

The farmers’ health insurance program could be terminated if they were covered by social insurance.They could be covered by national health insurance.

Farmers were entitled to retirement pay.There was no such stipulation in their health insurance program.Their old age welfare benefits – a NT$4,000 monthly subsidy – could be reduced or suspended, if the government’s financial burden became heavier as the aging population continued to grow.They would benefit more and the government’s burden become less heavy, if they participated in the social insurance program.

Farmers’ health insurance provided benefits for health, maternity, disability and funeral. No benefits were provided for old age, the bereaved, and the physically and mentally disadvantaged. National pension insurance (NPI)provides them.

The loss the farmers’ health insurance program had accumulated as of the end of 2004 totaled NT$100 million.The program continued to lose NT$50 million a year after 2004.Their welfare benefits cost NT$30 billion in the meantime. They were required to pay NT$78 a month as their share of the NT$10,200 premium for their health insurance.The NPI program would require a rise in their share in premium payment to reduce the loss.

Farmers’ health insurance had 1.67 million subscribers as of the end of 2004.A survey by the Directorate General of Budget, Audit and Statistics, showed there were not more than 720,000 farmers at the end of 2002. In other words, close to one million non-farmers were covered by farmers’ health insurance. Most of 720,000 farmers, about 480,000 or 68 percent, were 45 years old or older.The mean age of the insured was 56.7 years.Of the 1.67 million farmers’ insurance subscribers 680,000 were 65 years old or older. If farmers were not covered by NPI, the government could not prevent them from falling below the poverty line.

On the other hand, the government had to make up for the loss in the revenues from premiums.Low-income farmers could pay less in their premium contributions. Those receiving household subsidies were exempt from premium payment.The loss had to be made up by the government, whose burden continued to grow heavy.To relieve such burden, the government might set an age limit for applicants and/or raise the subscribers’ share of the premium.If farmers were made NPI subscribers, all these problems would be solved.

2.Disadvantages

Farmers had to pay a higher premium if they were NPI policyholders.If they were to receive the elderly pension, farmers 25 years old had to pay premiums for 40 years. Those who were 40 years old had to pay for 25 years. Farmers did not like to subscribe to NPI.

On the other hand, NPI does not offer benefits for childbirth. If farmers were compelled to subscribe only to NPI, they would lose a maternity pay(which equals the pay for two months).

Pension System versus Allowance

Experiences of a welfare state verify that elderly welfare subsistence allowance and NPI play different roles. The former is a social subsidy, which is a representation of collectivism that emphasizes the rights of citizens. It is funded through transfer of government revenues. The latter, on the other hand, is a social insurance, based on the concept of semi-collectivism which comes between individualism and collectivism. Semi-collectivism stresses mutual assistance as well as personal responsibility. And it relies for funding on insurance premiums paid by policyholders and governmental grants. NPI specifies monthly contributions. Participants, aged 25 or above, have to pay 10 to 40 years to collect pension on retirement. No input is required of recipients of elderly welfare subsistence allowances and old age farmers’ welfare benefits, which are given out as a charity that can be suspended without explanation. In addition, the allowances and benefits are blamed for increasing public debt when politicians propose to raise the payment of benefits to win elections.

To describe a social security system as hidden public debt is a hypothesis. It assumes that at a particular time all the insured reach the age of 65 year old, and retire at the same time, making it impossible for the government to pay all the benefits. In reality, such assumption of all policyholders retiring at the same time is not warranted and does not hold because it does not accord with the intergenerational transfer of risk-sharing function. Experiences of welfare states verify that the biggest drawback of a social security system is the decline in population growth. It will entail enormous debt for the next generation and even huge liabilities to the government. In this sense, the actuarial finance system is important. The premium and contributions need to be dynamically adjusted according to the actuarial result. The government should rule out political considerations, especially during election time. The insured have to pay normally. Then there will be no hidden debt.

A small number of social welfare organizations have protested that NPI is a mutual-help system for vulnerable people. The pension is available to only those people who are required to participate: i.e., housewives, farmers, and self-employed people. If voluntary participation is permitted, people will have better protection on retirement. If public functionaries, workers and servicemen who are covered by their respective insurance were allowed to sign up for NPI as well, they would increase income replacement after retirement. Then it may become a real universal basic pension.

Basic Pension

Ultimately, NPI aims to provide universal old age economic security. Taiwan has to strive for providing all the people 65 years old or older with enough support to keep their minimum standard of living. This is in keeping with the spirit of universal welfare state and social security.

The NPI program, which was launched in 2008, benefits 3,530,000 of the disadvantaged people. They include unemployed workers, students, housewives and the physically and mentally disadvantaged people. Military personnel, civil servants, and jobholders are excluded.

Social welfare groups argue that the program offers a mere small-cale pension scheme.They criticize it as a mutual-help system for the vulnerable people. They insist that the principle of social security is for the rich to help the poor to achieve the effect of mutual assistance, and want a wider participation.They believe the more participants the better. They also fear that the ‘small-scale pension scheme’ runs counter to that principle, wondering how long it will last. NPI leaves out economically advantageous people, such as civil servants, military personnel and teachers. For lack of more contributions, they argue, the program will go bankrupt. Obviously, the administration does not want to face these problems. It is more concerned about whether workers would have a pension and servicemen and civil servants enjoy high-income replacement. The administration believes equality and justice will be lost, if they are allowed to participate in the program.

In fact, to include public functionaries, teachers, military personnel and labor in the NPI scheme is to protect their basic civil rights rather than to allow them to have ‘double protection.’ The scheme is supposed to be one for a basic pension, separate from occupational insurance, like the insurance for civil servants, servicemen and labor.

The World Bank has suggested a three-tier model of old age protection to resolve the problem of old-age poverty. The government should develop a multi-level system to provide more security for the old. All people should be allowed to sign up for NPI. As the pension only supports retirees to maintain the minimum standard of living, the government needs to encourage people to work. When people are working they are entitled to an occupational insurance. It stands to reason that people shall have more provision in retirement and avoid pension poverty.

Taiwan has 8.7 million workers, whose retirement payment is less than 50 percent of income replacement. That is far below 70 percent considered enough by the World Bank to maintain a decent standard of living. The government should encourage labor to sign up for NPI to top up their retirement income. In addition, retired workers entitled to retirement benefits were given elderly welfare subsistence allowances. They lost the subsidies when the NPI program was launched. Nor could they receive pension payment unless they subscribed to NPI. They would each lose NT$3,000 a month.

The responsibility of the government is to protect people's retirement income in real terms. Labor insurance provides meager retirement benefits. Even if the income replacement rate is raised, the retirement payment will not prevent labor from old age poverty. The government shifts the liability of workers’ retirement to employers who have to pay a lion’s share of insurance premiums. If they are required to pay more, their cost of operation will be greatly increased.They may consider passing the added cost to consumers or closing down their businesses. If retirement benefits are raised while the premiums remain the same, the labor insurance may be risking bankruptcy. Either way, workers are not beneficiated.

The government wishes to stop paying old age farmers’ welfare benefits after the NPI program got under way.Otherwise, the national treasury will add more than NT$2 trillion to public debt over the next 40 years. On the other hand, the NPI Act does not provide for penalty. It is difficult to stop paying farmers’ welfare benefits while they are free to sign up for NPI. Besides, it is also difficult for the national pension to pay the welfare benefits. (Should all old farmers be given a NT$6,000 subsidy across the board? How can the burden of the national treasury be eased, if the benefits are incorporated in the pension?) In fact, the solution seems simple. All that the government has to do is to let NPI evolve into a basic and universal pension. Only new farmers are required to participate in the NPI program. The pension right of farmers is guaranteed and the payment of welfare benefits can be terminated in due time.

If allowed to subscribe to NPI freely, the number of participants will increase by eight million. When they all sign up, more than half of the insured will contribute and the government does not have to pay subsidies. In other words, the more people join the more stable the NPI system will be.Moreover, people will have more confidence in the government. One estimate put a resulting increase in outlay at NT$4.3 billion a year. But it is far lower than the elderly welfare subsistence allowances and the old age farmers’ welfare benefits put together. In the long run, this is a win-win policy for the government and should be wholeheartedly supported as such.

The worldwide trend is to make retirement security not only the government responsibility but personal obligation as well. Taiwan has to follow the trend, getting prepared to start a universal basic pension.Such a universal system of basic protection is a necessity indeed. All citizens should be encouraged to sign up for NPI to lay the ground for a basic pension, which can truly shield the retirees against poverty.

〈本文謹代表作者個人意見〉