On the 8th, the Pension Special Committee Proposes Structural Reform Direction Over Parametric Reform
Structural Reform Hidden Behind the Hot Potato of Parametric Reform
[Asia Economy Reporter Naju-seok] The Pension Reform Special Committee, which was launched to reform public pensions such as the National Pension Service, has effectively come to a halt. The Pension Reform Special Committee, which seemed poised to present a blueprint for pension reform, has openly slowed down discussions after confronting 'hot-button issues' such as National Pension insurance premiums and income replacement rates. The original plan of the Pension Special Committee to discuss pension reform in the National Assembly after the private advisory committee prepared reform measures by the end of last month has collapsed.
On the 9th, the political circles were thrown into confusion over the Pension Special Committee’s decision to focus more on structural reform rather than the originally discussed parametric reform. While some criticized this as a setback in pension reform discussions, others said that the pension reform debate, which had been off track due to its focus on issues like insurance premium rates, was now finding its proper path.
The day before, Kang Ki-yoon, the People Power Party’s secretary of the Pension Special Committee, after meeting with other secretaries and private advisory committee members at the National Assembly, told reporters, "Structural reform of the public sector must come first," adding, "It is not too late to discuss parametric reform when the government’s proposal arrives while we are researching and integrating structural reform." Originally, the Pension Special Committee had planned to prepare one or multiple pension reform proposals by the end of last month. However, the situation became complicated as the committee failed to reach consensus on parametric reforms such as insurance premium rates and income replacement rates. While there was general agreement on raising insurance premium rates, there were significant disagreements among private advisory members over whether to increase future National Pension benefits.
Due to this, meetings between the Pension Special Committee secretaries and the private advisory committee are expected to adjust the advisory committee’s future schedule. However, after the meeting, it was indicated that they would wait for the government’s proposal, expected around October this year, while discussing structural reform.
This discussion differs from the pension reform concept that the private advisory committee submitted to the Pension Reform Special Committee at the end of last year. Initially, the private advisory committee stated regarding the approach to pension reform, "Discussions will focus on parametric reform, with limited adjustments to parameters within the benefit formula as necessary for the consistency of a multi-layered income security system." They explicitly instructed to focus on parametric reform, but now they have shifted to saying parametric reform will be discussed later when the government’s proposal is released.
Regarding this change in attitude, harsh criticism has emerged within the Pension Reform Special Committee. An opposition party member of the committee said, "This is the product of the government’s lack of plans and the ruling party’s irresponsibility," adding, "Initially, there was an opinion to discuss pension reform proposals together with the special committee and the private advisory committee, but it was rejected, and when the private advisory committee made proposals, they refused to accept them." Another official said, "The government seemed to want to accept proposals if discussed in the National Assembly, but now that it has become a hot-button issue, it feels like they are backing out."
However, some opinions suggest that the excessive focus on parametric reforms such as insurance premium increases has overshadowed more fundamental issues like old-age poverty, which should have been addressed during the pension reform process. Democratic Party lawmaker Lee Yong-woo said, "I have thought structural reform is more important," adding, "Ultimately, pension reform is just a matter of timing; it will be depleted anyway. We need to draw a bigger picture of how the state will handle this and then move into detailed parts. Discussing only parts is wrong." He criticized the discussion process that focused on controversial parametric reforms. Lee said, "The Pension Reform Special Committee should center on how to solve the old-age poverty problem, but it is nonsensical that this issue is missing while pension reform discussions proceed," adding, "(This time) this part should be discussed more intensively."
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