Reviewing the Conversion of Retirement Payment to Corporate Pension

The government has reviewed the plan to change to the corporate pension system, the current retirement payment system which has been independently managed by the individual corporate.

The Ministry of Labor (MOL) told yesterday that ``As the working period of the laborers has become short and the pension system has expanded, it is desirable alter the current retirement payment system to the corporate pension system. The Ministry will discuss the introduction of the pension system, the proper moment of the introduction and the concrete plans in the Subcommittee on Labor Relations of the Korean Tripartite Commission.``

The corporate pension refers to the system in which the business owners entrust the retirement allowance of the workers to the financial institutions, and pay by the form of the pension after the workers retire. Because the corporate pension is managed by the business owner, it is different from the state pension and the personal pension.

If the corporate pension is introduced, the retirement payment can be guaranteed—currently the payment of 636.7 billion won was delayed as of April—, and the saved money can be transferred easily to a new company when the worker moves to the other company.

The MOL explained that the advanced countries generally have established the multilevel system in order to guarantee the income after the retirement, such as the state pension, the corporate pension, and the personal pension. And the Korea Labor Institute prospected that the least of 3 trillion won or the most of 20 trillion won may be invested to the stock market, when the corporate pension system will be introduced.

But there are some problems such as the financial loss due to the pension management, and the difficulty in stably collecting the pension from the small and medium companies. And there still remain the problematic issues such as the enforcement by the law, tax benefit, the company scale for the early introduction, and the payment method.

An official of the MOL explained the background of the introduction of the corporate pension system, saying that ``The current retirement payment system is not suitable for the changing environment, because it refers to a payment scale on the basis of seniority for the long-term regular workers``.

Kim Joon-Seok kjs359@donga.com