Financial Calculation Committee to Release Final Pension Reform Report on the 1st
The draft report of the Financial Calculation Committee, which will present the direction of pension reform, will be publicly released on the 1st of next month. However, since the Financial Calculation Committee ultimately failed to prepare a unified recommendation, the burden on government agencies such as the Ministry of Health and Welfare, which must prepare a pension reform plan by October, has increased.
According to related ministries on the 28th, the National Pension Service will disclose the final report containing the direction of pension reform through a public hearing of the Financial Calculation Committee to be held at COEX in Gangnam-gu, Seoul, on the 1st of next month. The report is the final outcome of discussions held over 21 meetings since November last year by the Financial Calculation Committee. The Financial Calculation Committee is an advisory body under the Ministry of Health and Welfare, composed of experts discussing the direction of National Pension reform.
The Financial Calculation Committee is known to present dozens of possible scenarios combining various pension reform options in the final report. The core focus is on strengthening financial stability measures to prevent the depletion of the National Pension fund, with scenarios prepared for increasing the contribution rate, raising the pension benefit starting age, and raising the target pension return rate.
The reform scenario options expected to be derived by the Financial Calculation Committee are predicted to number in the dozens. Since the committee members failed to reach consensus on what would be a reasonable increase in contribution rates, scenarios proposing increases from the current 9% to 12%, 15%, and 18% were prepared. Along with this, options to raise the pension benefit starting age to 66, 67, or 68 years old and to adjust the fund’s average annual return rate upward by up to 1 percentage point were also presented. Combining all these options results in dozens of possible scenarios.
With the Financial Calculation Committee failing to produce a single recommended reform direction, the burden on government agencies such as the Ministry of Health and Welfare, which must present a comprehensive National Pension plan to the National Assembly by October, is expected to increase. Especially with the general election approaching, gaining momentum is not easy. The National Assembly’s Special Committee on Pension, formed last year to discuss pension reform, only expressed the opinion earlier this year that “parametric reform is the government’s responsibility.”
A government official said, “Even among experts within the Financial Calculation Committee, opinions on pension reform measures differed and perspectives varied, making it inevitable to struggle to prepare a single scenario,” adding, “With the general election approaching, the government faces considerable burden in preparing a unified reform plan that increases the public’s financial burden.” He continued, “The government may narrow down the dozens of scenarios presented to a few options for final presentation, but (in the worst case) it is not impossible that the government will accept and present the dozens of combinations proposed by the Financial Calculation Committee as they are.” In this case, it would be difficult for the government to avoid criticism of shirking responsibility.
The government is currently discussing measures to strengthen financial stability and, if contribution rates are increased, ways to reduce the increased burden on socially vulnerable groups. A governance reform plan is also being prepared, as the current system is seen to have limitations in raising the fund’s return rate.
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