Will They Find a Solution for 'Pension Reform'... Full-Scale Start of National Pension Financial Calculation This Month

Deriving Fiscal Balance Forecasts Until March Next Year ... Submission of Comprehensive Operation Plan to the National Assembly in October

On the 10th, the "2022 3rd National Pension Deliberation Committee" was held at the President Hotel in Jung-gu, Seoul, chaired by Cho Gyu-hong, the 1st Vice Minister of Health and Welfare.

The government will officially begin the National Pension financial calculation, conducted every five years, later this month. They plan to complete the financial projections by March next year and present a National Pension reform plan in the second half of the year. Pension reform is a key policy task of the Yoon Seok-yeol administration, and with pessimistic views prevailing that the deficit transition and fund depletion will occur earlier than initially expected, the urgency to prepare reform measures is increasing.

The Ministry of Health and Welfare held the National Pension Deliberation Committee on the 10th and started work on the financial calculation for the National Pension. The financial calculation is conducted every five years according to the National Pension Act, serving as the basis for reviewing the long-term financial status of the National Pension and establishing improvement measures such as adjusting contribution rates and pension payment rates. Previously, the government conducted the 1st to 4th financial calculations in 2003, 2008, 2013, and 2018, respectively. In the most recent 4th financial calculation, the deficit transition point of the National Pension fund was projected to be in 2042, and the depletion point was forecasted to be in 2057, three years earlier than previously expected.

However, the National Assembly Budget Office predicted in its own 2020 projection that the National Pension financial balance would turn to a deficit in 2039 and the fund would be exhausted by 2055. At a 'Pension Reform for the Youth Generation' public-private-government forum held by Ahn Cheol-soo, a member of the People Power Party, on the 9th, Yoon Seok-myeong, a research fellow at the Korea Institute for Health and Social Affairs, projected that "the fund will be completely depleted by 2056, and the cumulative deficit will reach 2,265 trillion won by 2092, 70 years later."

President Yoon Seok-yeol has emphasized the need for pension reform, mentioning it as one of the three major reform tasks of the new government. Both ruling and opposition parties agree that the deterioration of the National Pension’s finances is inevitable due to population decline and aging, and on the 22nd of last month, they agreed to form a Special Committee on Pension Reform.

Cho Kyu-hong, the first vice minister of the Ministry of Health and Welfare, who chaired this National Pension Deliberation Committee, said, "Social interest in pension reform is higher than ever, and pension reform is an urgent task that can no longer be postponed. Considering past experiences in pension reform discussions, we aim to focus on preparing feasible alternatives through the operation of a committee strengthened with expertise."

Accordingly, the Ministry of Health and Welfare set the Financial Calculation Committee’s goal to develop institutional reform measures, under which the Financial Projection Expert Committee and Fund Management Development Expert Committee will operate. In particular, the Financial Projection Expert Committee will be formed first and begin financial projections this month. By March next year, they plan to derive long-term financial forecasts and establish a comprehensive National Pension operation plan based on these, which will be submitted to the National Assembly by October next year. If social consensus is needed, opinions will be gathered through the National Assembly’s Special Committee on Pension Reform, among others.

Meanwhile, Vice Minister Cho also mentioned the government task of raising the basic pension paid to low-income elderly from 300,000 won to 400,000 won per month during the meeting, suggesting the possibility of coordination between the National Pension and the basic pension. He said, "Since the gradual increase of the basic pension is also presented as a government task, I hope that the consistency between the National Pension and the basic pension will be discussed together at this Financial Calculation Committee."