Pension Cuts for Working Seniors... "Old-Age Pension Reduction Rules Must Be Abolished"

Pension Reduced by 200 Billion Won Due to Work
"Considering Elderly Work Motivation, It Should Be Abolished"
Proposal to Prioritize Basic Pension for Low-Income Groups
Advice to Legislate National Pension Payment Guarantee

The National Pension Financial Calculation Committee has proposed the long-term abolition of the reduction system that 'cuts old-age pensions when working.' Although the current system must be maintained for the time being due to pension financial burdens, there are claims that improvements are necessary considering the working desires of the elderly.

[Image source=Yonhap News]

At a public hearing held on the 1st at COEX in Gangnam-gu, Seoul, the Financial Calculation Committee unveiled measures to stabilize the National Pension Fund finances along with plans to secure income for old age. The committee explained that while it placed more emphasis on financial stability than on strengthening guarantee benefits for the National Pension Fund, it also examined methods to secure income for old age equally alongside improvements to the fund system.

The committee stated that the old-age pension system based on income activities needs to be revised. The old-age pension is a benefit that forms the basis of the National Pension, paid to ensure livelihood stability and welfare improvement when National Pension subscribers are unable to engage in income activities due to aging.

However, the fact that old-age pensions are reduced based on income has been pointed out as a problem. Old-age pension recipients face pension reduction measures if they obtain a job after retirement. As of last year, 127,924 people were receiving old-age pensions, with the total reduction amount reaching 190.6 billion won.

For this reason, there have been many criticisms that the current system diminishes the elderly's motivation to work. As the aging trend continues, the need for the elderly to engage in jobs increases, but paradoxically, working results in losses from the pension. The Organisation for Economic Co-operation and Development (OECD) has also recommended abolishing the reduction system, and major countries overseas are moving toward eliminating it.

The Financial Calculation Committee recommended the long-term abolition of the reduction system. Kim Yong-ha, chairman of the committee, also stated, “There should be no pension cuts for those who work.” However, he added that since pension reductions can help alleviate pension financial expenditures, the system should be maintained for the time being.

Regarding the basic pension, the committee proposed changing the method of giving it to 70% of elderly people aged 65 and over. The intention is to introduce a method that sets certain criteria to further select recipients in order to strengthen income security for low-income elderly. They also argued that increases in the basic pension should not be applied equally to everyone but should be prioritized for the lower-income groups.

The committee also pointed out the low guarantee level of survivor pensions. Currently, survivor pensions pay 40-60% of the basic pension amount depending on the subscription period. For those with less than 10 years of subscription, the income replacement rate is only 8%, which falls far short of the International Labour Organization (ILO) treaty's minimum standard of 40%. Accordingly, a plan to unify the payment rate at 60% was proposed.

There was also a call for the necessity of legislating payment guarantee measures for the National Pension to reassure the public. This means that clear payment guarantee provisions should be enshrined in law to eliminate future payment anxieties. In addition, proposals were made to expand childbirth and military service credits and to increase insurance premium support for all low-income regional subscribers.