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A future where people should pay 30% of income to national pension

A future where people should pay 30% of income to national pension

Posted September. 28, 2022 07:37,   

Updated September. 28, 2022 07:37


Concerns are rising over stalled pension reform, one of the three major reform plans that Korea's Yoon Suk-yeol administration previously showed a strong will to carry out. The National Assembly's Special Committee on National Pension Reform has not been doing its job properly for almost two months. The government's reform proposal will be submitted by October 2023. The opposition Democratic Party has pushed for increased basic pension entitlements, putting the reform agenda on the back burner, which made the situation all trickier. Experts who joined The Dong-A Ilbo's feature on reforming the national pension to overcome generational conflict and ensure co-existence worried that initial reform efforts may become futile.

Contrary to deferred discussions by the government and political circles, the urgency for pension reform is ever more growing. Due to the nation's worsening fertility rate, which is already one of the lowest in the world, it is estimated that the national pension will likely dry up before 2057, earlier than predicted. The OECD also stressed that Korea's national pension urgently needs reform and suggested raising the contribution ratio and lowering the mandatory subscription age. In Europe, French President Emmanuel Macron announced that he would resume the reforming process for the French national pension, which was stalled due to labor protests and strikes.

Politicians feel pressured to move forward with pension reform because it inevitably penalizes one generation to benefit another. If the pension contribution increases, the younger generation may have to suffer. If the age for pension money is pushed back, the middle-aged generation nearing retirement would have to bear the brunt. And if the pension entitlement is decreased, the older generation would have to take the heaviest burden. Previous administrations of Korea, which toyed with the reform plan, quietly dropped the idea at some point because they thought it did not help them win the elections.

However, people are increasingly worried about the excess pension burden imposed on the next generation. Those born in 2022 may have to pay more than 30 percent of their monthly income as a contribution when they reach 35 to maintain the current pension system. Considering the tax and the social health insurance they have to pay, they may have to give up more than half their wages. According to our poll for the feature article, the majority of the respondents from the older generation were willing to push back the age for pension entitlements by three years, while more than half of the respondents in their 20s and 30s said they were ready to pay 100,000 won more for pension contributions for future generations. The poll results show that there are enough people who believe it is not fair for the coming generations to take such a disproportionate burden.

Pension reform is not an impossibility if every generation makes small concessions, works together to come up with a reasonable plan, and takes enough time to convince others and to be convinced. Advanced countries such as Sweden and Japan, encountering pension problems, underwent the same process of reforming their pension system and making it sustainable. The Korean government and lawmakers must seriously consider people’s concern for the next generation and their wish for social integration and solidarity and should speed up the reform process.