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[Editorial] We May Be Better Off with Personal Savings Than a National Pension

[Editorial] We May Be Better Off with Personal Savings Than a National Pension

Posted April. 26, 2005 23:34,   


The national pension reform act brought before the April extraordinary session of the National Assembly has been pushed to the extraordinary session in June. The political arena continues to delay pension reform. It is evident that this is to avoid the responsibility of reforming the pension and to win the hearts of voters. If this situation continues, the national pension fund is expected to be depleted by 2047. Against this backdrop, calls to repeal the national pension scheme and rely on personal savings are gaining ground.

The government has implied that it may connect special pensions, such as the government employee pension or the military personnel pension, with the national pension plan. This is to provide pension benefits to public servants who have not completed the minimum period for subscription (20 years). However this measure has the problem of possibly shifting a burden onto private workers who faithfully pay into the pension fund from their wages. The government employee pension, which is ‘low burden, high return,’ received 600 billion won in government support this year.

According to the pension information website “Pay Open,” 73.3 percent of workers responded that out of the deducted items on their salary, they paid the national pension fee most grudgingly. This is because of fear that they may not receive their promised benefits. Therefore, some workers even view the national pension not as savings for the future, but as a type of involuntary tax. So they strive to find other ways to save money and increase their wealth for a stable living and a secure retirement life. As a result, the national pension is reducing the current disposable income of individuals, and is leading to sluggish consumption.

Individual preferences for their elderly life are as diverse as products in the market. Some wish to work for as long as they live, while some want to stop working at an early age and enjoy their hobbies. It is worth noting that in 1981, Chile increased its savings ratio and achieved high growth through the privatization of its public pension system. The United States has also begun to privatize its social security system. The trend is to let individuals take responsibility for their security in retirement years as much as possible.

If the government is going to fail to draw up reliable pension reform plans and continue to pursue political interests, we may be better off reducing the importance of the national pension or privatizing it and increasing personal and corporate pensions. Those neglected in these measures can be supported by the nation through a social security system.