[Enemies of Reform④] Experts Say “Pension Fact-Check First... Government Must Show Willingness”

Problems in the National Pension Structure and the Right Direction for Reform?
Premiums Cannot Be Raised as Much as Needed... 12-13% Is Realistic
The Reason for the Lack of National Pension Coverage Is "Short Enrollment Period"
Regarding the Pension Reform Committee, "Ultimately, Government and Presidential Decision Is Needed"
Most Opinions on Pension Integration Theory Are "Impossible or Inappropriate"

[Asia Economy Song Seung-seop] Where should we start unraveling the tangled issues of the National Pension Service? On the 20th, Asia Economy asked four experts via a non-face-to-face method about the problems in the structure of the National Pension and the proper direction for reform. The experts agreed on the seriousness of the National Pension issues and unanimously stated that resolving them requires verification of facts that the majority can agree on, along with the government's strong will based on those facts. 'Enemies of Reform'

A Contribution Rate of 12~13% is Realistic, Opinions Divided on Income Replacement Rate Adjustment

Oh Geon-ho, Policy Committee Chair of the Welfare State We Make, pointed out, "The National Pension pays out much more than what is contributed," adding, "It is difficult to reduce current benefits, so reform to raise the contribution rate is absolutely necessary." Kim Sang-bong, Professor of Economics at Hansung University, also analyzed, "Even if Korea's current tax burden rate is low, when combined with the costs paid for the four major social insurances, the amount future generations will have to pay is too large."

Most experts agreed on the need to raise contribution rates but showed a gap regarding realistically feasible levels. Jeong Jae-hoon, Professor of Social Welfare at Seoul Women's University, explained, "The second baby boom generation born after the 1970s will also become pension recipients, so it is necessary to raise the contribution rate quickly while they are working," adding, "This will reduce the burden on subsequent generations even slightly and is rational in terms of paying more and receiving more." Jeong Hae-sik, Director of the Pension Research Center at the Korea Institute for Health and Social Affairs, agreed, saying, "In the future, other factors like the pensionable age can be adjusted, so the contribution rate should be settled now."

Regarding specific levels, Chair Oh said, "If we calculate the contribution rate for a balanced budget based on current subscribers, it rises to 18~20%,” but added, “Although actuarially that should be the case, realistically it is impossible, so it must be phased in gradually to around 13~15%." He further added, "A short-term increase to about 12% followed by a slow increase is necessary." Director Jeong said, "To prevent depletion, the contribution rate should be raised to about 17~18%, but realistically it cannot be raised that high. If done this time, I think it can be raised to 12%."

Some experts proposed alternatives to raising the contribution rate. Professor Kim suggested, "There seem to be three methods: since it costs a lot, cancel existing ones and distribute funds, or everyone receives the basic pension and only those who want to receive the National Pension pay more," adding, "The last method is paying more and receiving less, but people will dislike it and resistance will be severe, so the first method should also be considered."

Professor Jeong emphasized the need to expand the discussion beyond contribution rates. He said, "We can consider extending the pension subscription period or introducing a voluntary system that allows quicker enrollment in the National Pension."

Opinions were divided on whether Korea's income replacement rate of about 40% is appropriate. Chair Oh said, "Judging by the benefit level of public pensions, it is not low institutionally," adding, "The problem of insufficient coverage arises because there are few pension recipients and the labor market is unstable." Professor Jeong mentioned, "The reason pension benefits are low is that the subscription period is too short," and noted, "The call to raise the income replacement rate to 40% is similar to Germany's level."

However, Director Jeong stated, "It is hard to say that Korea's National Pension benefit level is sufficient." He judged, "Long-term subscribers to the National Pension are in a decent position when combined with the basic pension, but if based on short-term subscribers, I think the coverage does not reach an appropriate level."

"Politics is the Problem" as the Reason Pension Reform Has Not Been Properly Achieved

When asked why pension reform has not been resolved despite various discussions, 'politics' was cited as the cause. Professor Jeong criticized, "There were several reform plans in previous administrations, but decisions were not made and they stalled," adding, "It seems they judged that there were sensitive issues related to votes in elections. Until now, successive presidents have failed to make firm decisions on pension reform and have been politically indecisive." Chair Oh also expressed the opinion that the National Pension problem was so serious that reform plans were burdensome.

Discussion was also held about the Public Pension Reform Committee. The Public Pension Reform Committee is a kind of social consensus body promised by the Yoon Suk-yeol administration since the presidential election campaign, emphasizing pension reform. Chair Oh said, "The difficulty lies in the large differences in the diagnosis of the situation among groups with different opinions," and urged, "The committee must conduct an objective fact-finding on the pension situation." He predicted, "If objective perceptions are not narrowed, pension reform is likely to continue on parallel tracks."

Professor Kim viewed the existence of the committee itself as not the core issue. He advised, "I think reform can happen as long as there is a purpose," adding, "We need to consider what should be done here, and there must be things the government is willing to push forward with determination." Professor Jeong also emphasized, "No matter how the pension reform committee is formed, determination is the most important," and urged, "We need to conclude to proceed in this way."

Regarding the opinion to integrate the National Pension with other occupational pensions such as the civil servant pension, negative views prevailed. Professor Kim expressed concern, "Merging other pensions will not solve the problem," adding, "Funds that are depleted cannot be replenished by other occupational pensions, nor does it improve fiscal soundness. Rather, it may cause more conflicts." Professor Jeong also added, "There could be organizational resistance," and noted, "Even Germany and other advanced pension countries have pension systems according to special occupations." Director Jeong predicted, "The intention is aligned, but that does not mean it is feasible in reality, and it will be difficult to implement."

Chair Oh stated, "Because the systems are different, there is alienation and conflict among the people," and explained, "The civil servant pension existed as a post-compensation system due to low benefits, but the situation has changed." He emphasized, "To reduce conflicts and provide an equal pension system to all citizens, it is necessary to integrate pensions and move toward a single National Pension system."