People Power Party Proposed Formation of Pension Reform Special Committee
Democratic Party Calls It a "Hypocritical Proposal"
The government has proposed a pension reform plan including structural improvements, but conflicts between the ruling and opposition parties are intensifying. It is expected that even the formation of the Special Committee on Pension Reform will face difficulties.
Minister of Health and Welfare Cho Kyu-hong is announcing the pension reform promotion plan on the 4th at the Government Seoul Office in Jongno-gu, Seoul. Photo by Jo Yong-jun jun21@
On the 4th, the Ministry of Health and Welfare announced a plan to promote pension reform by raising the current income replacement rate from 40% to 42% and the contribution rate from 9% to 13%. This is the first time in 21 years since 2003 that the government has presented a pension reform plan. Additionally, without revising the law, the plan includes an automatic adjustment mechanism that automatically adjusts pension amounts and retirement age based on factors such as demographic structure and inflation rate, as well as differentiated contribution increases by generation. The Ministry explained that while a parameter reform that only changes the income replacement rate and contribution rate can extend the fund depletion point until 2072, improving the structure with mechanisms like the automatic adjustment device can delay it up to 2088.
The People Power Party welcomes the government’s plan. During the 21st National Assembly, a parameter reform approach proposing an income replacement rate of 44% and a contribution rate of 13% was suggested, but since the current plan also includes structural improvements, it is considered reasonable. Park Soo-young, chair of the People Power Party’s Pension Special Committee, said at a press conference at the National Assembly in Yeouido, Seoul, the day before, "It is meaningful that the direction of structural reform has been presented in addition to the parameter reform discussed in the 21st National Assembly," adding, "The opposition party’s claim that parameter reform alone is sufficient has limitations in achieving the goals of public pensions, such as sustainability, securing retirement income, and alleviating elderly poverty." Regarding criticism that the income replacement rate has regressed, Park responded, "Considering fiscal stability, it was an inevitable choice."
On the other hand, the opposition views the government’s plan as insufficient to replace actual income. They argue it is a significant regression from the income replacement rate of 50% and contribution rate of 13% ultimately proposed by the 21st National Assembly’s Public Deliberation Committee. Kim Sung-joo, former Democratic Party lawmaker and opposition party secretary of the 21st National Assembly’s Special Committee on Pension Reform, said on social media the day before, "If the contribution rate rises to 13%, people will have to pay an additional 120,000 won monthly, but with an income replacement rate of 42%, the pension increase will be only 60,000 won," predicting, "It will be difficult to gain public consent."
They also criticized that structural improvements will not receive public support. They pointed out that introducing the automatic adjustment mechanism will reduce the actual pension received by reflecting inflation and other factors. On the 5th, Democratic Party members of the National Assembly’s Health and Welfare Committee held a press conference at the National Assembly, stating, "The automatic adjustment mechanism automatically reflects demographic and economic conditions to induce pension cuts," and "It is clear that pension reductions due to the automatic adjustment mechanism will increase for younger generations."
At this rate, it is expected to be difficult even to form a body to discuss future government pension reform plans. The People Power Party is demanding the launch of a Pension Special Committee from the opposition, but the opposition including the Democratic Party is rejecting it. Yoon Jong-gun, Democratic Party floor spokesperson, told reporters that day, "The People Power Party’s proposal is contradictory," adding, "It is hard to accept the idea of creating a special committee to discuss a government plan that tramples on the hard-won agreement of the 21st National Assembly’s Pension Reform Special Committee."
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