Gov’t should come up with aligned plan for pension reform

There are growing concerns about pension reform losing momentum as the National Pension Financial Calculation Committee, a government advisory body, failed to develop an aligned pension reform plan. Though the basic framework was set to increase insurance premiums and retain the pension amount to be received (income replacement rate), specifics of the premium rate and pension age had still not been determined, leaving behind nearly 20 scenarios but no priorities.

The Committee devised three proposals: keep the current income replacement rate at 40% and increase the insurance premium rate by 12%, 15%, or 18%. It also proposed to delay the pension age from 65 to 66, 67, or 68. This alone results in nine different cases. Adding two other options for return on fund management investment would increase the cases to eighteen. Despite more than 20 rounds of meetings last year, such outcomes only show that the committee failed to develop an effective plan. In 2018, the Committee proposed two plans. Given the increased urgency of the reform due to the accelerated depletion of funds, the expert group’s lack of responsibility is even more disappointing.

Critics also point out that raising the projected average annual return on fund management from 4.5% to 5% - 5.5% is also unprofessional. A 0.5 percentage point increase will delay fund depletion by two years and one percentage point increase by five years. It is a fact that the rate of return should be increased, given the average annual rate of return over the past 10 years at 4.9%. However, raising the yield projection for the next 70 years by 0.5 percentage points is unrealistic.

With the Committee’s activities ending without any feasible recommendation, the government is now responsible for pension form. The former administration had devised a four-option type reform plan, hindering speedy reform. We look forward to the government holding up its commitment to pension reform and educational and labor reform by coming up with an aligned plan by October and hope that the National Assembly will do its part. They should keep in mind that while they pass on the burden of reform as well as political pressure to one another, the cost of burden by the people only increases.