Posted September. 01, 2014 05:15,
From the second half of next year at earliest, the government starts to allow public officials to join the retirement pension, which has been only open to the private sector employees. In concert with the governments reform plan to lower the amount of public officials pension to be on a par with that of national pension, this measure will make the life-time income structure of the civil servants close to that of private sector employees. Concerns are raised over potential increase of the governments financial burden since the government needs to set aside 2 trillion won (1.98 billion U.S. dollars) annually to provide the retirement pension.
According to the Ministry of Strategy and Finance and the Ministry of Security and Public Administration on Sunday, the government plans to save an average monthly income into the account of a private financial company every year and provide a pension when the public official retires.
The retirement pension system has been introduced to the private sector in 2005. As of the end of March this year, 4.99 million wage earners, or 48 percent of the entire private employees, have joined the retirement pension.
The government also plans to apply the retirement pension system associated with national pension to newly hired public officials who will join the government after the second half of next year. Based on the reform plan currently under review, the income replacement rate (the ratio between the monthly after-retirement-pension amount and the average income during employment) of a public official who will start service from the end of next year will be determined at around 40 percent, which is on a par with that of national pension. This rate is quite lower than the income replacement rate of the former public officials (63 percent). However, the government estimates that the reduced income after retirement can be supplemented by encouraging the newly hired public officials to subscribe to the retirement pension system.
For the incumbent public officials, the government is reviewing a measure to recognize the current income replacement rate (63 percent) before the pension system is reformed, and to apply a lower income replacement rate (40 percent), which is on a similar level of national pension, after the new pension system takes effect.