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Pension system reform proposal sparks controversyBy Lee Jaeeun
Published : Sept. 7, 2023 - 17:00
A recent proposal to reform South Korea's pension system has sparked widespread controversy, as the plan includes increasing subscriber contributions while delaying the age at which subscribers can receive pension benefits.
While the pension age is already set to increase from the current 62 to 65 by 2033, the reform proposal that the National Pension Financial Calculation Committee is pushing the most is to raise the pension age to 68. Pension premiums will also be increased gradually by 2036, reaching a total increase of 15 percent of subscribers' annual salaries, up from the current 9 percent.
The current total subscriber contribution is 9 percent of one's salary, with both one's employer and the employee splitting the 9 percent contribution equally. The self-employed are required to pay the full 9 percent alone.
In February, the National Pension Service said its funds are anticipated to be depleted by 2055, should the country maintain the current system, amid the critically low birth rate and super-aging population.
The committee initially presented 18 reform scenarios based on its fiscal goal to avoid fund depletion by 2093, but the scenarios were narrowed down to five plans. The minimum age for subscribers to begin to receive their pension is currently 62 this year.
The proposal was reportedly devised to ensure that a 20-year-old who newly joined national pension this year will receive a stable pension until the age of 90 in 2093 considering the average life expectancy, according to the committee. The life expectancy of Korean nationals was 83.6 as of 2023, according to the Organization for Economic Cooperation and Development.
Some experts say the reform proposal is a viable alternative.
“The pension premium rate in most advanced countries is also around 18 percent, including 18.3 percent in Japan. However, in Korea, a 15 percent measure was proposed. The government should consider the extent to which the public would be able to accept that,” Kim Yong-ha, an economics and business studies professor at Soonchunhyang University, said.
However, the plan has generated opposition from subscribers, particularly young people.
“Korea's population is on the decline every year, so I am worried that the national pension will be depleted by the time I can start receiving it. In these circumstances, I cannot bear it if the premiums are raised,” a 32-year-old office worker surnamed Kim said.
According to the survey, "Public Awareness of the National Pension System," of 1,000 Koreans conducted in July, 68 percent of respondents aged 18-39 said that they believe that the pension fund will be depleted by the time they are eligible to start receiving a pension.
The Ministry of Health and Welfare, meanwhile, said it will take the report into account before submitting a blueprint of the pension reform to the National Assembly next month. Health Minister Cho Gyu-hong said that “the government plan will place weight on public acceptance.”
All those residing and working here regardless of nationality are required to be subscribed in the public pension system, operated by the NPS. It is receivable by retirees who paid premiums to the service during their working years.
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