Labor insurance is part of the social security system, while old-age benefits is one form of benefits provided for by the Labor Insurance Act. A worker participates in labor insurance throughout his/her life of employment, which relied on three-way contributions by employer, the government and by the worker. Upon fulfilling all necessary conditions for retirement, the worker may apply to the Bureau of Labor Insurance for payment of his/her old-age benefits. The amount paid for the old-age benefits is calculated based on the worker's insurance seniority and his/her average monthly insurance salary. Any applicant who has met all requirements can claim his old-age benefits regardless of any job changes in his/her working career.
The Labor Pension System refers to the system under which an employer is legally obligated to provide retirement pensions to a worker. There are currently two systems in place—an old pension system and a new pension system. The old system is a scheme outlined in the Labor Standards Act. Under the old system, every month, an employer contributes a sum that amounts to 2 to 15% of a worker's monthly wage into a special account as the reserve fund of retirement payment for workers. Ownership of this pension account belongs solely to the employer and is supervised by the Department of Trust of Bank of Taiwan.Once a worker can legally retire and applies to claim his/her pension payments, the employer can allocate the accumulated funds to pay it. However, due to the dynamics of the domestic labor market where workers often switch jobs and where the lifespan of small and medium-sized businesses average only 13 years, many workers cannot realistically receive a stable form of pension once retirement comes around.
To address the shortcomings of the old pension system, after over a decade of discussions and negotiations between labor, employer groups, political parties and government bodies, the Labor Pension Act was promulgated on June 30, 2004 and come into effect on July 1, 2005. Under this new system, the employer contributes 6% or more of a worker's monthly wage into an individual pension account overseen by the Bureau of Labor Insurance. Ownership of this pension account now belongs to the worker. Upon reaching 60 years of age, a worker may apply directly to the Bureau of Labor Insurance to receive the dividends and principal that have accumulated over the years.
Originally the new labor pension system only applied to those workers of the R.O.C nationality who are subject to the Labor Standards Act; however, since January 17, 2014, it has become also applicable to those workers who are spouses with foreign nationalities and spouses from China, Hong Kong and Macau. In addition, the Act for the Recruitment and Employment of Foreign Professionals was enacted as of February 8, 2018. According to this Act, the new labor pension system shall from that date be applicable to foreign professionals who are hired to engage in professional work and who have obtained permanent residence. With effect from May 17, 2019, foreign employees who have obtained permanent residency are also applicable to the new labor pension system.
In short, the old-age benefits provided by the Labor Insurance Act and the new Labor Pension System are clearly two separate systems altogether. Therefore, no matter what pension system a worker chooses old or new the choice will not negatively affect those workers who are already entitled to old-age benefits. The new pension system merely adds an extra safeguard for workers in their life after retirement.
Labor Pension vs. Labor Insurance Old - Age Benefits
Labor Pension
Labor Insurance Old-Age Benefits