Pension Reform Gains Momentum... Full-Scale Discussion on Establishing the Grand Unity Organization

Ahn Cheol-soo Chairman "I Will Create a Grand Unity Organization"

Ahn Cheol-soo, Chairman of the Presidential Transition Committee, is attending the 13th Special Committee Meeting on COVID-19 Emergency Response held at the Transition Committee office in Samcheong-dong, Jongno-gu, Seoul, on the afternoon of the 18th. Photo by Transition Committee Press Corps

The issue of pension reform, selected as a core national agenda of the new government, is set to enter full-scale discussions. Ahn Cheol-soo, chairman of the Presidential Transition Committee (PTC), initiated the process, and it is known that there is a high possibility of forming a separate organization to discuss pension reform.

According to the PTC on the 19th, separate from Chairman Ahn Cheol-soo's directive to create a social grand coalition body capable of implementing pension reform, the committee has already begun work on establishing a separate organization or committee dedicated solely to pension reform. The day before, Chairman Ahn stated, "The role of the PTC is to create a social grand coalition body capable of pension reform within a short time and to bring stakeholders together to start discussions."

◆ Full-scale establishment of a 'grand coalition body' to discuss pension reform = President-elect Yoon has pledged to establish a presidential public pension reform committee to devise pension reform measures. Chairman Ahn also expressed that rather than the PTC presenting specific pension reform plans, it is preferable to set up a committee to pass on the discussions.

Currently, only the broad direction of pension reform has been mentioned, and specific measures have not been disclosed. However, it is known that many private experts are likely to be appointed around the committee members handling pension reform within the PTC. Chairman Ahn also emphasized at a press briefing the day before, "It is difficult for us to create guidelines on issues such as raising pension insurance premiums or how to handle the income replacement rate," adding, "I have my own thoughts, but once I start talking about them, it itself becomes controversial, and people with different interests may not reach a compromise."

Future government reorganization is also expected to influence pension reform discussions. The PTC is currently discussing separating the health and welfare functions of the Ministry of Health and Welfare. The welfare functions are being considered to merge with the family functions of the Ministry of Gender Equality and Family to create a new ministry called the Ministry of Family and Welfare. President-elect Yoon has appointed Kim Hyun-sook, a pension reform expert and policy special advisor to the president-elect (professor at Soongsil University), as the minister of the Ministry of Gender Equality and Family.

◆ High possibility of pushing for an increase in insurance premium rates = There is a high likelihood of pursuing an increase in insurance premium rates as a measure to reform the National Pension Fund. Kang Sung-ho, senior research fellow at the Korea Insurance Research Institute, predicted in his early June report titled "Private Pension Response Direction during Pension Reform" that the new government's National Pension reform discussions will focus on raising insurance premium rates.

The National Pension was reformed twice, in 1998 and 2007. However, it still inherently has a structural problem where beneficiaries receive more than they contribute. If the current state of declining birth rates and continuously decreasing working-age population persists, the fund is estimated to be depleted between 2055 and 2057.

Because both past reforms were pushed forward with a focus on reducing benefit amounts, the National Pension's function as a source of retirement income security has been weakened. Senior Research Fellow Kang expects discussions to center more on raising insurance premiums rather than cutting benefits. He predicted, "If the insurance premium rate is raised gradually over about 20 years, as in the past, the shock of institutional changes can be mitigated."

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