[The Editors' Verdict] Political Circles Must Join Forces on Pension Reform

President Yoon Suk-yeol identified pension reform as the most urgent reform task during his first policy speech to the National Assembly on the 16th, reflecting the judgment that "it can no longer be postponed." President Yoon stated, "The crises and challenges we face both domestically and internationally are difficult to overcome without completing the reforms we have delayed." He cited "establishing a sustainable welfare system" and "providing a seamless social safety net" as reasons for the necessity of pension reform.

I believe there is not a single politician who would disagree with President Yoon's awareness of the problem. While the elderly population is rapidly increasing and life expectancy is lengthening, the declining birth rate is causing a decrease in the future generation's population, which means pension finances will soon run dry and ultimately have to be supplemented by taxes.

Despite the continuous calls for pension reform, the reason why neither the ruling nor opposition parties have tackled it so far is truly because it was like "trying to bell the cat." They could not honestly tell the public to pay higher insurance premiums while cutting retirement pensions. The fear of losing elections if they led pension reform was significant. But delaying only increases the burden on the people. This burden will fall on the young generation who must participate in productive activities and pay pension premiums and taxes in the future.

There are difficult issues to resolve in pension reform. It is necessary to guarantee adequate retirement income through pensions while securing financial sustainability. These two goals are not only difficult to achieve individually but also conflict with each other, so fulfilling one requires partially sacrificing the other. The higher the income replacement rate (the ratio of retirement pension to lifetime average income), the worse the pension finances become. From a social welfare perspective, it would be ideal to raise the National Pension income replacement rate to 70%, but considering the financial situation, it should rather be lowered. This year, Korea's income replacement rate stands at 43%, which is lower than the OECD average of 51.8%. This is consistent with the fact that Korea has the highest elderly poverty rate among OECD countries. The Ministry of Economy and Finance projected that the National Pension would run a deficit in 2041, but in reality, the pension fund is expected to be depleted much sooner.

Germany, which has been exemplary in pushing forward pension reform, faces a similar situation. In 2005, Germany raised the pension eligibility age from 65 to 67. It also introduced a sustainability factor that automatically adjusts pensions in line with population aging. This is known as the "Schr?der reform." However, by guaranteeing an income replacement rate of 48% until 2025 and keeping insurance premiums below 20%, finances worsened again. Within Germany, voices are emerging that additional pension reforms are necessary because the burden on the younger generation to support the elderly will increase excessively.

As pension reform discussions progress, controversy over "who pays more and who receives less" is inevitable. At this point, concessions from the older generation are necessary. If pensions for current and soon-to-be recipients are not reduced and only insurance premiums are raised, it will be difficult to gain the sympathy of the younger generation. Instead, it is necessary to consider other forms of social welfare to support retirement security. If intergenerational conflicts escalate like this, ultimately the political sphere must resolve them. With local elections scheduled for the 1st of next month, the "time for pension reform" is approaching. For once, I hope they will not be swayed by votes but keep only the future of the Republic of Korea in mind.