Discussion on Mandatory Annuity Conversion: "Retirement Pensions Should Be Received as Annuities, Not Lump Sums"

'Super-Aged Society Public and Private Pension Reform Seminar' Held
Mandatory Enrollment in Retirement Pension Leads to Mass Enrollment of Workers in Businesses with Fewer Than 30 Employees

[Asia Economy Reporter Jang Sehee] At a seminar jointly hosted by the Korean Pension Association and the Korea Institute of Public Finance, voices criticizing the structure of retirement pensions were raised.

On the 19th, Yang Jaejin, a professor in the Department of Public Administration at Yonsei University, pointed out at the 'Super-Aged Society Public and Private Pension Reform Seminar' held at the Korea Chamber of Commerce and Industry that "quasi-public pensionization of retirement pensions is very important." Quasi-public pensionization refers to receiving retirement pension benefits in the form of a pension rather than a lump sum.

As of 2019, the fund reserves of retirement pensions amounted to 221.1 trillion won, with 22,216,229 subscribers.

He predicted, "If retirement pensions are pensionized and function as a source of old-age income, the old-age stability of middle-class and above workers will greatly improve." He also argued that if the mandatory application of retirement pensions is expanded to small businesses, it could partially contribute as a source of income for low-income elderly groups.

He emphasized, "In a situation where life expectancy is increasing and the pension receipt age must be gradually raised, quasi-public pensionization of retirement pensions is urgent."

He claimed that if retirement pension subscription becomes mandatory, a large number of workers at businesses with fewer than 30 employees will subscribe.

He stated, "Non-wage workers such as 6 million self-employed persons, special-type workers (teukgo), freelancers excluded from retirement pension coverage, and short-term contract workers within one year can subscribe to the Individual Retirement Pension system (IRP). It is necessary to provide fixed subsidies to those excluded from retirement pension coverage, similar to the German Riester pension, to encourage IRP subscription."

Although providing fixed subsidies to those excluded from retirement pension coverage may be a budgetary burden immediately, it can reduce future costs spent on basic security.