[Editorial] Fundamental Reform of Pension Fund Needed

The government decided to cut the costs and expenditure of 60 components of the pension fund, including the Government Employees Pension by 10 percent. Since the expenditure for the pension fund this year is estimated at 74.5 trillion won, this means about 7 trillion won can be saved. Although not an insignificant number, this initial attempt of pension fund reform should go further than simply cutting it down by a few percentage points. The government should eliminate excess fat in the fund, increase fund efficiency and relieve taxpayer burden in the fund’s upkeep.

Despite the fact that the pension fund amounts to 370 trillion won this year, twice the 182 trillion won allotted for governmental budget expenditure, the government has not been prudent in the fund’s management and supervision. Many civil employees tend to regard it as “money that should be spent at any cost,” and those in the fund management division turn a blind eye to inefficient supervision, as they are more concerned about their days after retiring from work. Cases of frequent reckless management occur, like when bureaucrats erroneously overstate wages and over-calculate the fund’s operation fees, using the alibi that they are “doing it for the public good.”

Reforming the pension fund, along with the reform of government bureaucracy and public corporations, is one of the fundamental tasks that must be achieved in order to effect “a small government and a large market.” But the attitudes of the fund-related ministries make one wonder if they are able to do this competently. Although the government ordered them to report plans to cut expenditures by yesterday, many of the pension fund institutions did not even make the deadline and instead made excuses.

Most institutions say, “There is no room for further cuts because the utmost is already being done to cut expenses.” This contradicts with the estimate by the Strategy and Finance Ministry which says that just reducing ordinary spending, including operation costs, traveling expenses and administration costs, will lead to potential savings of around 230 billion won.

With this in mind, it is also imperative to set up a program of fundamental reform by assessing the relevant pension fund departments individually from square one. Many of them are similar enough to be merged into one; for example, the Korea Credit Guarantee Fund and the Korea Technology Credit Guarantee Fund have overlapping tasks of subsidizing small and mid-sized enterprises, and the Han River Basin Management Fund and the Nakdong River Basin Management Fund both aim to improve water quality. The government would weed out these inefficient factors that cause excessive budget expenditures with the mindset that “even 1 won of the people’s tax money is valuable,” and correct those flaws.