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[Editorial] Disappointing Pension Reform Plan

Posted September. 25, 2008 08:58,   


A policy proposal to reform the civil servant pension system presented yesterday by the National Pension Schemes Development Committee has fallen short of expectations. The measure seeks to ease the government’s financial burden by increasing pension contributions 27 percent and reducing pension payments up to 25 percent. The committee, however, failed to come up with a fundamental solution to the snowballing pension deficit.

The stop-gap measure was expected, however, given the formation of the committee. Members have a stake in pension reform, with a third comprising those from public servant unions and retired civil servants who are pension recipients. Because they have a strong say in the committee, the reform proposal will not touch the vested interests of public officials, and will only reduce pension benefits for prospective civil servants.

The civil servant pension deficit soared from 59.9 billion won in 2003 to 609.5 billion won in 2005, and further skyrocketed to 1.3 trillion won this year. The government said pension reform will cut the annual deficit 51 percent over the next five years from 2.79 trillion won to 1.36 trillion won. Still, the reduced deficit will be the responsibility of taxpayers.

The problem is how to manage a looming pension crisis after the Lee administration ends its term. The leveled-off deficit of 1.3 trillion won over five years will rise again from 2012 and reach 6.01 trillion won in 2018, five times the current amount. Along with funds to reduce the deficit, the government should also finance pension payments as well as retirement funds. All this will lead to a public burden of an estimated 4.93 trillion won next year, and the figure will balloon three times to 13.65 trillion won in 2018. This is nothing less than passing the “pension bomb” on to the next administration.

The reform proposal also failed to live up to comments made by Public Administration and Safety Minister Won Se-hoon in June. He pledged to make both new and existing public servants pay premiums and receive benefit as much as ordinary workers do. No wonder some call the proposal worse than the scrapped revision plan suggested under the previous government.

The existing compensation system for civil servants was set up when their salaries were far less than those in the private sector. Things have changed, however. Public servants and teachers are favored professions among college students. To bring fairness to the national pension system that was revised last year, the committee should have presented a better plan making public servants share the burden with the public.