[How Is Your Dream] A Happy Retirement: Pension Reform Is Not an Option but a Necessity

[Opinion] Pension Reform Must Be Undertaken to Ensure More Citizens Receive Adequate National Pension Benefits

It is said that an appropriate retirement living expense is about 2.68 million won for couples and about 1.65 million won for individuals. This is the result of a survey conducted by the National Pension Research Institute on 7,000 citizens aged 50 and over (the 8th survey of the 2019 National Retirement Security Panel). On average, couples spend about 2.24 million won per month, and individuals spend about 1.09 million won. However, as of August last year, the average amount of the National Pension old-age pension was only about 540,000 won, and the average survivor’s pension was about 290,000 won. Even adding the basic pension of 300,000 won is far from sufficient. The majority of South Korean citizens are inevitably forced into poor working conditions even in old age. This is the reality behind South Korea’s ranking as number one in elderly poverty rate among OECD countries and the true face of retirement income security in South Korea.

Experts talk about establishing a multi-layered retirement income security system, but private pensions in South Korea cannot become a universal source of retirement income. Although 94% of the economically active population is enrolled in the National Pension, only 21% are enrolled in retirement pensions and 25% in private pensions, and these private pension subscribers are mainly from the middle-to-upper classes with saving capacity. If the current situation, where the state leaves retirement income as an individual responsibility, is not improved, many citizens will inevitably face miserable old age on the path of self-reliance. However, discussions on strengthening the necessary public pension have long been absent. The political sphere has only continued reforms focused on reducing the level of the National Pension.

The novel coronavirus disease (COVID-19) has dealt a more severe blow to vulnerable groups in the labor market. Although the length of enrollment is the most important variable in determining the level of the National Pension, the state is expanding exemptions from payment without any support measures related to National Pension enrollment or contributions. If one cannot pay National Pension premiums now, it will lead to no pension or low pension in the future, inevitably widening the retirement income gap.

For a happy retirement for all, ways must be devised for as many citizens as possible to receive sufficient National Pension benefits. The income replacement rate of the National Pension must be raised immediately. At the very least, the reduction of the income replacement rate should stop so that the retirement income security function of the National Pension does not decline further. Additionally, more citizens should be able to accumulate longer enrollment periods in the National Pension. Institutional reforms are needed to eliminate blind spots, such as improving contribution standards and supporting premiums so that the National Pension broadly covers vulnerable groups in the labor market. The ineffective credit system, which is the only one among OECD countries that does not provide support for the birth of the first child under the so-called childbirth credit, must also be improved.

We must move toward a brighter future. If pension reform, which has been neglected by every administration as a ticking time bomb, is ignored again, the retirement of the people will become bleak. It is time to move toward a strong path of retirement income security where everyone supports each other through National Pension system reform so that more citizens can receive more sufficient National Pension benefits.

Oh Jongheon, Secretary General of the National Action for Strengthening Public Pensions

This content was produced with the assistance of AI translation services.