[News Terms] Key Issue of National Pension Reform: 'Income Replacement Rate'

Kwon Moon-il, President of the National Pension Research Institute at the National Pension Service, is giving a lecture on the topic of "The Direction of Pension Reform" at a study meeting hosted by the People Power Party's Public Sympathy on the 1st at the National Assembly. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Kim Jong-hwa] The 'income replacement rate' refers to the ratio at which the income received while working is replaced by a pension. In other words, it is the rate at which the average income during the National Pension contribution period is replaced by the National Pension.

Currently, the National Pension contribution rate is 9%, and the income replacement rate is 40%. For workplace subscribers, both the individual and the employer each pay 4.5% of the salary to the National Pension, while regional subscribers bear the full 9% themselves. Based on a subscription period of 40 years, one receives 40% of their average personal income monthly as a pension.

However, since the average subscription period for the National Pension is only 27 years, in reality, people receive a pension lower than this. Generally, the income replacement rate for a comfortable retirement is known to be around 65?70%. The current pension system is therefore quite insufficient.

As concerns over the depletion of the National Pension fund grow more serious and criticisms about the low income replacement rate continue, discussions on National Pension reform have been gaining momentum, centered around the National Assembly. The government plans to announce a National Pension reform plan in October, referencing the National Assembly's proposal.

On the 1st, at a seminar held by the private advisory committee of the National Assembly's Special Committee on Pension Reform, discussions were held regarding the income replacement rate, contribution rate increases, and raising the subscription age. At the seminar, there was consensus on raising the National Pension subscription age from the current 59 to 64, but various opinions were expressed regarding maintaining the status quo or increasing the income replacement rate and contribution rate.

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