Bipartisan Agreement Reached
Bill to Establish Special Pension Committee for Structural Reform Also Passed
On the 20th, the National Assembly held a plenary session and passed an amendment to the National Pension Act, which includes a reform plan to raise the insurance premium rate (the amount paid) from 9% to 13% and the income replacement rate (the amount received) from 40% to 43%. With this reform, the depletion point of the National Pension fund has been postponed from 2055 to 2071.
During the plenary session, out of 277 members present, 193 voted in favor, 40 against, and 44 abstained, approving the amendment to the National Pension Act. This pension reform is the first in 18 years based on the income replacement rate since 2007, but it is the first in 27 years based on the insurance premium rate.
The revised insurance premium rate increases by 4 percentage points from the current 9%. Starting next year, it will rise by 0.5 percentage points annually for eight years. The income replacement rate, which determines the "amount received," will increase to 43% starting next year.
Regarding pension reform, the ruling and opposition parties had differing views on whether to proceed with structural reform simultaneously or to prioritize parameter reform first. With the passage of the pension reform bill this time, parameter reform will begin first, followed by discussions on structural reform through a special pension committee.
The pension reform passed this time includes improvements not only to the insurance premium rate and income replacement rate but also to military service and childbirth credits. The credit applied to those who have completed military service will be increased from the current 6 months to a maximum of 12 months, and the childbirth credit, which currently applies additional subscription periods from the second child onward, will be expanded to include the first child. Additionally, for low-income regional subscribers, 50% of the insurance premium will be supported for 12 months.
Furthermore, the reform plan includes provisions that the state guarantees the stable and continuous payment of the National Pension.
The ruling and opposition parties agreed to form a special pension committee to discuss structural reform as a follow-up to this parameter reform under the amended National Pension Act. Structural reform is expected to include discussions on introducing automatic stabilizers and multi-layered reforms of the national, basic, retirement, and private pensions.
Woo Won-sik, Speaker of the National Assembly, said immediately after the passage of the National Pension Act, "Despite severe political conflicts and confusion, I deeply thank the ruling and opposition parties for their concessions and decisions that led to the conclusion of negotiations on issues concerning the lives of the people."
Meanwhile, Cho Kyu-hong, Minister of Health and Welfare, explained at the Welfare Committee plenary meeting, "The National Pension fund will be able to be maintained until 2071, and the retirement income of the people will be guaranteed more stably."
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