Taiwan's old labor pension fund yields billions, but profits go to employers

Taiwan's "old system" labor pension fund has achieved a remarkable return on investment, earning over NT$290 billion in the first four months of 2026. The fund's performance reached an impressive 31.55% during this period, significantly outperforming the "new system" labor pension fund, which saw a 19.73% return.

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This is simply a matter of mathematics.

Labor Pension Fund Administration Deputy Director Liu Li-ju explained that this high yield is primarily a "simple math problem." Due to a shrinking number of workers under the old system and legal restrictions limiting overseas investments to 60%, the fund has been heavily invested in the domestic stock market. This strategy has paid off handsomely, especially with the recent surge in Taiwan's stock market.

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The "denominator is shrinking," and coupled with legal restrictions preventing overseas investment from exceeding 60%, the old-system labor pension fund can only invest as much as possible in domestic stocks.

Conversely, the "new system" fund, which has seen continuous contributions from active workers, is growing rapidly. The administration's asset allocation has struggled to keep pace with this growth, leading to a larger "denominator" and thus a comparatively lower yield. Crucially, despite the impressive profits generated by the old system fund, these earnings are not distributed to the workers. Instead, the accumulated gains are credited to the company accounts of the employers, who are legally obligated to provide pensions under the old system. This means the substantial investment returns directly benefit the businesses rather than the 480,000 remaining old-system laborers.

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The company's retirement reserve account is used exclusively for that purpose, and ownership belongs to the employer.