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How long will gov’t pay for pensions with taxpayers’ money?

How long will gov’t pay for pensions with taxpayers’ money?

Posted September. 06, 2021 07:35,   

Updated September. 06, 2021 07:35


The reserve money to fill in the losses of civil service pension will increase by 58% next year from 2.6 trillion won to 4.1 trillion won. This is the largest amount since the government started to pay the losses of the pension in 2001. It is the steepest increase rate as well. The veteran’s pension is also projected to record a loss of 2.9077 won, which increases the size of the reserve money to fill in the deficits to 2.922 trillion won.  

Social insurances such as the veterans’ pension should cover expenditures with their own income including pension holders’ payments. But both pension funds have already been depleted, which is why the government has been filling their deficits with taxpayers’ money since 2001 and 1973, respectively. The burden has been put on taxpayers because the government failed to reform the structure of the pensions in a way that they reflect the change of population and increase payments of holders while reducing burdens.  

Such an irregular financial commitment is also showing its limits. It is because pension entitlements are increasing due to longer lifespan, while the population to make payments for the pensions is rapidly decreasing. The civil service pension’s deficit will decrease to three-trillion won range thanks to the government’s largest financial commitment in history, but it is projected to grow by one trillion won every year starting with five trillion won in 2023. Provisions of two pensions increased by some 300 trillion won to 1,044 trillion won last year, in just four years. Provisions are pension liabilities that converted the amount of pension for the next 70 years to the current value. When they dry up, the government has to pay for them.  

Under the circumstances, the government is not taking any action to reform the pensions at all. Experts advise to increase pension contributions to over 30% to stabilize the finance of the civil service pension. But the government has not had any discussion about this after increasing the contribution rate of the civil service pension from 14% to 18% and made no change in the veterans’ pension in 2015. In fact, the government increased the deficit by adding 120,000 civil servants to the force, and dumped the political burden of reform the pensions to the next government. Presidential candidates of the Democratic Party of Korea only make palatable pledges such as basic income, but never talk about pension reform. There are numerous people who are anxious to become a civil servant. Should citizens take on the burden of their post-retirement life?