[Defense Brief] Let's Introduce the Military Pension Peak System

There is growing concern over the rapidly declining officer application rates. Not only the military academies of each branch but also the admission competition rate for the Army 3rd Military Academy is falling. The admission competition rate for the Army 3rd Military Academy is at its worst. It dropped from 6.1 to 1 in 2018 to 3.6 to 1 in 2022. Since last year, it has been reported to be below the quota. This year, the recruitment quota for 3rd-year students at the Army 3rd Military Academy was 550, but only 430 applicants (78.1%) applied. It has been reported that the remaining number of applicants is only about 310 as of recently.

Young officers nowadays do not find the military attractive. They think that soldier service, with increased pay and reduced service periods, is better. Measures must be taken. Financial support should be increased. It may be difficult due to limited budgets. If so, the military pension peak system should be introduced. The military pension is a pension system for active-duty soldiers ranked sergeant and above. The military pension peak system aims to reduce the pension amount after a certain age to inversely support junior officers. The military pension is chronically in deficit. The amount of government subsidies is increasing every year. According to data from the National Assembly Budget Office, if the military pension fund cannot cover expenses with contributions from members and government burdens, the shortfall is covered by government subsidies. The military pension fund deficit is expected to increase from 3.1 trillion won last year to 5.9 trillion won in 2032. As military pension expenditures increase, the required government subsidy will also rise from 2.2329 trillion won this year to 10.084 trillion won in 2060.

The first reason the military pension cannot escape deficits is the increase in beneficiaries. Last year, the total number of military pension beneficiaries was 104,065, a 9.2% increase compared to 95,281 in 2019. The second reason is the lack of regulations on the pension start age. Unlike the civil servant pension, the military pension law does not specify a pension start age. When a soldier who has served for more than 20 years is discharged, the pension is paid from the following month immediately. If a sergeant or officer serves from age 19 and is discharged at 39, they can receive the pension right away. According to the Korea Insurance Development Institute, the average life expectancy of Korean men is 86 years. Cases where pensions are received longer than the years contributed are inevitable. As average life expectancy increases, pension finances will worsen further. This is why the urgent need for reform is raised to solve the military pension problem.

The military pension peak system can be an alternative. In general companies, when reaching a certain age (usually 56 if the retirement age is 60), a wage peak system is implemented where salaries are reduced by a certain amount until retirement. The pension peak system freezes or reduces pension payments after a certain age. The economic activity of people in their 60s and 70s cannot be the same as those in their 80s and 90s. It is undesirable for unused pensions to be saved or used as pocket money for children. A significant portion of that money includes taxes from citizens who earn less than the pension payments.

The political sphere also played a role in the decline of young officers’ application rates. Populist politics on military service aimed at votes led to increased soldier pay and shortened service periods. It was sweet at first, but the aftertaste was bitter. It ruined national finances and shook the foundation of national institutions. It undermined military unity and weakened combat power. Now, the political sphere must step up to reform the military pension. U.S. President Joe Biden said at the end of his inauguration speech in January 2021, "May America be blessed, and God bless our troops!" This is because politicians well understand the very basic fact that if the military collapses, everything in the country collapses.