Retirement funds for workers in Taiwan consist of two completely separate pillars: the first is Labor Insurance Old-Age Benefits (Labor Insurance), a collective social insurance pool where the statutory full pension eligibility age is permanently set at age 65 starting in 2026 / ROC Year 115 (workers with 15+ years of seniority receive monthly lifelong annuity pensions); the second is the New Labor Pension Scheme (6% Labor Pension), an individual retirement account where employers contribute at least 6% of monthly wages into the Bureau of Labor Insurance individual account, claimable at age 60 with zero bankruptcy risk. Furthermore, if workers voluntarily contribute an additional 1% to 6%, this voluntary contribution is 100% deductible from gross consolidated income for the year, saving tax.
Reminder: The statutory 6% Labor Pension contribution must be fully paid by employers under the Labor Pension Act; it can never be deducted from agreed employee wages! Any payslip showing deductions for "employer 6% pension" constitutes an illegal violation subject to labor inspection penalties.
1. Differences Between Labor Insurance Old-Age Benefits and New Labor Pension 6%
Many employees confuse Labor Insurance with Labor Pension, worrying whether insurance insolvency could affect their employer 6% contributions. In reality, their legal basis, funding pools, and eligibility ages are entirely separate, and qualifying workers receive both pensions simultaneously:
| Comparison Item | Pillar 1: Labor Insurance Old-Age Benefits | Pillar 2: New Labor Pension Scheme (6%) |
|---|---|---|
| Legal Basis and Nature | Labor Insurance Act; social insurance shared pool | Labor Pension Act; individual retirement account (portable, never bankrupt) |
| Premium / Contribution Source | Based on insured salary: employee pays 20%, employer pays 70%, government subsidizes 10% | Employer mandatory ≧ 6% (no wage deduction); workers may voluntarily contribute 1% to 6% |
| Maximum Insured / Contribution Wage | Maximum insured wage bracket is NT$45,800 | Maximum monthly contribution wage bracket is NT$150,000 |
| Statutory Claiming Age | Age 65 starting 2026 (115) (early claiming available up to 5 years earlier at age 60 with reduced rate) | Age 60 (claimable immediately upon reaching 60 regardless of employment status) |
| Lump-Sum vs Monthly Pension Terms | Seniority of 15+ years qualifies for monthly annuity; under 15 years yields lump sum (seniority prior to Dec 31, 2008 / 97 may choose old lump sum) | Contribution seniority of 15+ years allows choice between monthly or lump-sum payout; under 15 years yields lump sum of accumulated capital and yield |
Because Labor Insurance insured wages and Labor Pension contribution wages must be reported based on regular earnings, statutory minimum wage adjustments (see Minimum Wage Monthly, Hourly and Overtime Standards) require employers to adjust brackets without under-reporting.
2. Age 65 Full Pension Requirement from 2026: Early and Deferred 20% Table
Pursuant to Article 58 Paragraph 5 of the Labor Insurance Act, the statutory pension age increased by 1 year every two years starting in 2018 (107), reaching its ceiling at age 65 in 2026 / ROC Year 115 (all workers born in 1962 / ROC 51 or later must reach age 65).
When insurance seniority reaches 15 years upon resignation and insurance cancellation, the Bureau calculates pensions under Formula A and B, selecting the higher amount (Formula B: Highest 60-Month Average Monthly Insured Wage × Seniority × 1.55%). Claiming early or deferring adjusts benefits by 4% per year (maximum 5 years, adjusting up to 20%):
| Claim Option (Baseline Age 65 for Born 1962 / 51 Onward) | Actual Claim Age | Annuity Adjustment Ratio (Fixed Lifelong) |
|---|---|---|
| Reduced Annuity (5 Years Early) | Age 60 | Reduced by 20% (receives 80% of standard monthly annuity, but collects 60 months earlier) |
| Reduced Annuity (1 to 4 Years Early) | Ages 61, 62, 63, 64 | Reduced by 4% per year early (-16%, -12%, -8%, -4%) |
| Statutory Full Annuity (Standard) | Age 65 | 100% full payout |
| Deferred Annuity (1 to 5 Years Deferred) | Ages 66 to 70 (66, 67, 68, 69, 70) | Increased by 4% per year deferred; max increase of 20% at age 70 (receives 120%) |
