[Exclusive] 'Supporting National Pension Contributions for Self-Employed Like Workers'... Government Reviews System Overhaul

October National Pension Comprehensive Operation Plan Announcement Outlook
Low-income Workers Pay 80% of Contributions for 3 Years
Self-employed Receive 50% Support for 1 Year Only if Business Suspended
810,000 People Pay Diligently Despite Poverty but Receive No Support
Consensus Inside and Outside Government Is Strong... The Issue Is 'Funding'

The government has begun efforts to reform the unequal National Pension insurance premium support system between employees and self-employed workers. While low-income employees receive additional premium support from the state for up to three years, self-employed individuals have virtually no benefits. However, since additional funding must be secured, the extent to which support will be expanded remains a key issue.

According to a comprehensive report by Asia Economy on the 8th, the Financial Calculation Committee under the Ministry of Health and Welfare recently held its first discussion to include such measures in the National Pension Comprehensive Operation Plan scheduled for October. The Financial Calculation Committee is a government body responsible for pension system reform, composed of 15 members including subscribers, experts, and government officials. It is known that the committee reviewed ways to extend the current National Pension insurance premium support system, which is mainly focused on employees, to also benefit the self-employed.

The National Pension is broadly divided into workplace subscribers and regional subscribers. Employees aged 18 to under 60 who are employed by companies are workplace subscribers, while others such as self-employed and small business owners are regional subscribers. Both workplace and regional subscribers are required to enroll in the National Pension, but employees share the 9% premium rate equally with their employer. In contrast, regional subscribers such as small business owners and self-employed individuals must pay the full 9% premium rate themselves.

Although the burden is 4.5% for employees and 9% for regional subscribers, most support is focused on employees. The representative state premium support program, 'Durunuri,' targets employees working at businesses with fewer than 10 employees whose standard monthly income is under 2.6 million KRW. Among them, those with an annual comprehensive income below 43 million KRW receive up to an 80% discount on premiums for a maximum of 36 months. For example, if the premium is 100,000 KRW, the employee pays only 10,000 KRW after deducting 80% (80,000 KRW) from their 50,000 KRW share. Regional subscribers have been able to receive premium support since last year, but only when they resume paying after suspending contributions. Even then, reasons such as business suspension, unemployment, or leave must apply. The support level is also lower than for employees, covering only 50% of premiums for one year.

An official preparing related work hinted, “We plan to strengthen support for low-income regional subscribers,” adding, “We are considering extending the support period to 24 or 36 months.” They further explained, “Currently, the state pays premiums only if several conditions are met. There is discussion about supporting premiums for all low-income groups below a certain threshold or extending the support period.”

Those Earning Less Than 1 Million KRW Cannot Receive Premium Support Despite Faithful Payments

The contradictory system also causes reverse discrimination among regional subscribers. Poor self-employed individuals who faithfully pay their National Pension premiums are excluded from support. According to data submitted to Rep. Choi Hye-young of the Democratic Party by the Ministry of Health and Welfare, 810,000 people who earned less than 1 million KRW per month last year but paid premiums diligently did not receive support. The same applies to 320,000 long-term defaulters who delayed payments for more than 13 months.

As a result, experts are calling for the National Pension regional subscriber support to be reorganized to focus on vulnerable groups. Ryu Jae-rin, a senior researcher at the Korea Institute for Health and Social Affairs, released a research report last year stating, “It seems necessary to gradually extend the support period for regional subscribers in the National Pension,” and argued, “A plan to extend the support period up to a maximum of three years in a lifetime, similar to the Durunuri system, could be considered.”

Advanced pension countries overseas tend to be generous in supporting premiums for low-income groups. Japan exempts all or part of premiums for self-employed, students, freelancers, and unemployed individuals depending on conditions. In the UK, the premium rate for low-income groups is 0%. The premiums employees must pay are covered by taxes, while employers are still charged premiums. In Germany, if one receives unemployment benefits or unemployment protection, the Federal Employment Agency pays the premiums in full.

Inside and outside the Ministry of Health and Welfare, it is considered essential to address blind spots for vulnerable groups along with the announcement of the National Pension Comprehensive Operation Plan in October. This is because if pension reform leads to premium increases or a decrease in income replacement rates, vulnerable groups will inevitably be affected. A National Pension official explained, “Pension reform is likely to involve raising premium rates,” adding, “Before that, strengthening institutional benefits is necessary to secure persuasiveness for premium increases.” Oh Geon-ho, chairman of the Welfare State Policy Committee I Make, emphasized, “No matter how much the premium rate increases, regional subscribers will find it difficult to bear,” and stressed, “Expanding state premium support for urban area subscribers is essential to smoothly advance pension reform.”

The problem lies in securing funding. To expand support, additional allocations must be made from the national budget or pension fund. Currently, social insurance support is provided through the national budget. If funding starts to come from the pension fund, it would mean using one subscriber’s money to cover another’s premiums. This could undermine the purpose of the pension reform plan announced in the same month to ensure pension sustainability.

To mobilize the national budget, consultations with the Ministry of Economy and Finance, the budget authority, are required. The Ministry of Economy and Finance must address tax revenue shortfalls under a sound fiscal policy. An official said, “No official communication has been received,” but added, “It would be possible if the budget were flexible, but that is not the case now.”