TAIPEI (Taiwan News) — President Lai Ching-te (賴清德) said the ongoing pension reform for retired civil servants is aimed at ensuring the long-term sustainability of government finances and preventing the pension system from becoming insolvent, CNA reported.

Lai made the remarks at an awards ceremony honoring outstanding civil servants on Tuesday, following the Legislative Yuan’s passage on Friday of legislation suspending adjustments to the pension system for retired civil servants. He said the government has raised civil servants' salaries three times over the past four years, including a 3% pay increase that took effect in January, benefiting around 730,000 people.

Lai highlighted the importance of pension system reform, warning that suspending the adjustments would require the government to spend nearly NT$700 billion (US$23 billion) more annually on pension payments. He added the move could also affect pension systems for other groups, including beneficiaries of labor insurance, farmers’ insurance, and the national pension program.

According to the Ministry of Civil Service, the primary challenge facing the civil servants’ pension fund is insufficient contributions. The ministry estimates the fund could run out by 2049, and that suspending the planned adjustments would cause it to be depleted three years earlier. 

If the fund is exhausted, pension payments may not be made in full, with civil servants who have not yet retired expected to be the hardest affected. The ministry noted the additional pension payments would fall on taxpayers and could affect government spending on other social welfare programs or public infrastructure.

Lai also noted that former President Tsai Ing-wen’s (蔡英文) administration had promoted pension reform, spending more than two years coordinating changes to the system and laying the groundwork for extending the fund’s sustainability. He added the system should provide benefits under legal, reasonable, and fair conditions.

The government’s reforms to the civil servants’ pension system will reduce the percentage of a worker’s pre-retirement salary paid as a pension. For civil servants with 15 years of service, the rate will fall from 45% to 30% over 10 years, while those with 35 years of service will see it drop from 75% to 60% over the same period. The changes mean retirees will receive smaller pensions.

The KMT caucus said that further cuts to civil servants’ pensions could make it harder to attract talent, citing a drop in applicants for the civil service exam from 300,000 to 160,000 last year and 110,000 this year. The DPP caucus said the reform is necessary to ensure fiscal sustainability, while the TPP caucus supports pension reform but calls for reasonable adjustment rates to ensure fairness.