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The New Labor Pension System is not the Old-Age Benefits of the Labor Insurance Program

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

Item Old System New System
Legal Basis Labor Standards Act Labor Pension Act
Target Group Workers subject to the Labor Standards Act Workers to whom the Labor Standards Act applies (Taiwanese citizens; foreign spouses; spouses from mainland, Hong Kong, or Macau; and permanent resident foreigners)
Managing Financial agency Department of Trust of Bank of Taiwan. Bureau of Labor Insurance
Application Requirements and Procedures Retirement from service at the business entity meeting all requirements for retirement.

Apply to the employer for pension payment
1.Upon reaching 60 years of age.

2.Under 60 years old but has become unable to work.

Apply to the Bureau of Labor Insurance for payment of the worker's individual pension account
Payment Lump sum payment Monthly installments or lump sum payment
Standards of Benefits Payment of 2 units for each year of service. Payment of 1 unit per year starting from the 16 th year. Total units may not exceed 45 units (calculated on the average monthly wage 6 months prior to retirement) Accrued dividends and principal of the individual pension account

Labor Insurance Old-Age Benefits

Item Labor Insurance Old-Age Benefits
Legal Basis Labor Insurance Act
Target Group Workers qualified under the Labor Insurance Act
Managing Financial agency Bureau of Labor Insurance
Application Requirements and Procedures Meet requirements and conditions stipulated by the Labor Insurance Act for receiving old-age benefits.

Workers apply through their insured units to the Bureau of Labor Insurance to receive benefits
Payment Lump sum payment (or annual payments )
Standards of Benefits One Time Old-Age Benefits
1. For each full year of insurance coverage, one month of average monthly insured salary would be issued; should the total insurance coverage be more than 15 years, for the part which is more than 15 years, 2 months of average monthly insured salary would be issued for each extra year of insurance coverage with the maximum of 45 months.

2. Five years at most would be counted for the insurance coverage after 60 years of age, The maximum benefit payment amount shall not exceed 50 month’s insurance salaries including the old-age benefits receivable before he/she attained 60 years of age.

Old-Age Pension Benefits
The better result will be chosen:
A. Average monthly insured salary × coverage years × 0.775% + NT$3,000
B. Average monthly insured salary × coverage years × 1.55%。

Old-Age Lump Sum Benefits
For each full year of insurance coverage, one month of average monthly insured salary would be issued, with the maximum of 50 months.
Last Update:2021-08-20