[Bbang Gubneun Tajagi] There Is No National Pension for the People

The Story of Your National Pension That the Government Would Dislike If the People Knew

A book containing an honest and refreshing analysis of the National Pension System has been released. The new book, There Is No National Pension for the People, is a guide to the National Pension that every citizen of the Republic of Korea should read. As indicated by the subtitle, "Your National Pension Story That the Government Would Hate If the People Knew," it is a book intended for the general public rather than experts. A current journalist, a policy expert, and an engineering professor spent four years together pondering, researching, and analyzing facts and data to explain the National Pension in an easy-to-understand way.

The content of the book is quite provocative. If the National Pension is unstable, financial and insurance companies benefit from increased business. When public pension subscribers feel anxious, private pension products sell well. An ironic situation has emerged where the government spends more on tax benefits for private pension subscribers than on the budget supporting the public National Pension. Since insurance premiums have been capped at 9% for 25 years, companies that pay premiums for employed subscribers are relieved that their burden does not increase. Government officials responsible for the system are subscribers to the civil servant pension, unrelated to the National Pension, so even if National Pension reform does not happen, it does not affect their own retirement. Ultimately, there is no group that genuinely cares for the National Pension. This book begins with the question, "Why does no one sincerely care about such an important system?"

The National Pension may seem like a very complex system, but the core idea is simple: grandfathers serve fathers, fathers serve sons, and sons serve their sons. It is a social expansion of the principle of elderly care within families. A family may or may not have children. Someone in the family may die early or suffer an accident. If the entire society prepares together for old age, it can be much more efficient. This is the reason for social insurance systems and pension implementation. However, a problem has arisen. The elderly population who should receive money is increasing faster than expected, while the economically active population who pay premiums is decreasing too quickly. The elderly worry they might not receive the promised pension, and the young worry that premiums will become too high. If trust in the pension system is lost, the insurance framework could collapse. It is the state's responsibility to create fair rules and maintain financial stability to prevent this collapse.

Since 1988, the government has promised that if people pay premiums diligently, they will receive more money back to ensure a peaceful retirement. For someone to step forward and declare that it will be difficult to keep this promise under the current system, they must risk their political career. The book states that the reason Korean society has failed in pension reform since 2007 is that no administration was willing to take such a political risk.

The book’s most crucial argument is that distrust is what ruins the National Pension. At the center of the National Pension controversy is the theory of fund depletion. While this is a valid concern based on numbers, the authors explain that fearing the bankruptcy of public pensions in modern society is akin to fearing the collapse of the nation itself.

Let’s look at foreign examples. Germany, which opened the door to modern pension systems, experienced astronomical inflation and war financing through World Wars I and II, which completely wiped out the pension fund reserves accumulated until then. Since then, the German government established a pay-as-you-go pension system, collecting premiums from the economically active population and immediately paying retirees. The government uses its budget to cover any shortfalls. Even when war caused the national economy to collapse, the pension system continued to operate.

Therefore, the greatest threat to pension systems is not war or fund depletion but the subscribers’ trust in the system. If certain generations benefit while others bear a premium burden, the system’s existence is threatened. From this perspective, the book points out that the biggest problem with the current National Pension is a crisis of trust, and the failure of key actors to raise their voices to manage this crisis is problematic. Neither the government, the National Assembly, nor pension experts have been able to resolve the visible crisis. Ultimately, the authors argue that the top priority for National Pension reform is to reform the "system that cannot reform."

The book also contains information the government has not disclosed to the public. In 2022, the Organisation for Economic Co-operation and Development (OECD) analyzed and reviewed the National Pension at the request of the Korean government. The OECD stated that the Korean government has sufficient capacity to support the National Pension with state funds. An interesting fact is the reason why the government needs to spend money on the National Pension: the government has shifted responsibilities that should have been undertaken by the state to improve public welfare onto National Pension subscribers.

The book does not only point out problems with the current situation but also offers practical solutions with concrete figures. The increase in premiums should be kept significantly lower than the gross domestic product (GDP) growth rate so that socially vulnerable groups can endure the reform process. It proposes that the government inject funds now, when Korea’s economy is largest and the economically active population is at its peak. It also suggests moving away from the current situation where half of the National Pension assets are invested domestically, which is expected to yield low returns in the long term, and instead increasing expected returns by shifting domestic investments to overseas and alternative investments. These are honest and well-founded claims, supported by sophisticated analysis with 27 figures and 18 tables.

The authors conclude with this statement: The answer to "Will I still receive my pension even if the fund is depleted?" is obviously "Yes." If the people believe, even an unpaved path can be made. When the government introduced the National Pension system, it called it a "national promise." Let us never be afraid of the future of the National Pension!

There Is No National Pension for the People | Written by Wonjung Yoo, Jonghyun Won, Woochang Kim | The Forest | 18,000 KRW