National Assembly Pension Advisory Committee Reveals Reform Plan Delaying Depletion by 7 Years: "Increase in Contribution Rates and Income Replacement Rates"

Final Report Submitted by Private Advisory Committee under Pension Special Committee
Pension Depletion and Income Security Proposals Delayed by 7 Years, Fiscal Stability Proposal Delayed by 16 Years
National Assembly Ahead of General Election Says "Public Debate Needed"

The Private Advisory Committee under the National Assembly's Special Committee on Pension Reform (Pension Special Committee) has prepared a reform plan including specific proposals for premium increases. The plan contains concrete figures suggesting that premiums should be raised to 13% or 15%. The National Assembly, having received the advisory committee's and the government's pension reform proposals, will begin discussions on pension reform from today. The National Assembly has announced a plan to conduct a public opinion survey and make a final attempt at pension reform during the 21st National Assembly.

On the 16th, the Private Advisory Committee under the National Assembly's Special Committee on Pension Reform will officially begin discussions on key pension reform issues after submitting its activity report to the Special Committee and receiving the government's comprehensive National Pension operation plan from Minister of Health and Welfare Cho Kyu-hong.

In the report submitted to the Special Committee the previous day, the Private Advisory Committee proposed two reform plans: one with a premium rate of 13% and an income replacement rate of 50%, and another with a premium rate of 15% and an income replacement rate of 40%. Currently, the National Pension premium rate is 9%, and the income replacement rate is 42.5%. Both proposals include specific directions for premium increases. The first plan represents "paying more premiums and receiving more pension benefits," while the second plan involves paying higher premiums but slightly reducing the pension amount received by subscribers.

On the 16th, a plenary meeting of the Special Committee on Pension Reform was held at the National Assembly. [Image source=Yonhap News]

The Private Advisory Committee presented two reform directions narrowed down with specific figures. However, it did not fully reconcile the sharply divided opinions surrounding pension reform. The gap between proponents of strengthening income security, who argue that premium increases and raising the income replacement rate should be pursued together, and fiscal stability advocates, who insist that premium increases must come first, remains unresolved. Earlier, the Ministry of Health and Welfare's comprehensive National Pension operation plan announced last month was criticized for lacking specific figures. The government stated that a public consensus process is necessary and passed the responsibility for reform to the National Assembly.

Kim Yeon-myeong and Kim Yong-ha, co-chairs of the advisory committee, explained in their report to the Special Committee regarding these proposals that "if the premium rate is raised to 13% and the income replacement rate to 50% (income security plan), the fund depletion point will be extended by about 7 years." They added, "if the premium rate is raised to 15% and the income replacement rate is maintained at 40% (fiscal stability plan), the fund depletion point will be extended to 2071, about 16 years longer."

It seems unlikely that the National Assembly, facing next year's general election, will accelerate discussions. The National Assembly plans to form a public consensus committee to achieve social agreement, but it is expected to take considerable time to prepare detailed measures for launching the committee.

[Image source=Yonhap News]

In this regard, Joo Ho-young, chair of the Pension Reform Special Committee, urged the government to prepare a concrete parameter reform plan. At the end of the meeting, he said, "To conduct a public consensus committee, a somewhat structured agenda must be provided to solicit opinions; it is difficult to operate with a blank slate." He added, "Although the government has not yet presented a parameter reform plan, to conduct effective discussions, it is necessary to have some opinions and ask for approval or disapproval rather than throwing a blank slate and asking to choose from 24 possible combinations. The efficiency is low. I request that such discussions be held before operating the public consensus committee." Initially, the government presented 24 scenarios related to pension reform but did not offer a clear solution.

Chair Joo also urged speeding up the public opinion survey for the general public. He said, "The term of the 21st National Assembly ends on May 29 next year, and the general election is on April 10. Before the general election, the Special Committee must mature the discussions to the point where only the final decision remains."

An expert emphasized, "Realistically, it does not seem that a final reform plan will be prepared before the general election," adding, "The public consensus committee also faces difficulties not only in selecting participants?who, how, and how many?but also in how to collect the final opinions of participants who have completed their studies." He continued, "It is not easy even to create questions to gather opinions after objectively educating participants about pension reform," and added, "There is also a significant aspect of avoiding political burdens ahead of the general election."