"Facing Pension Reform, Retirement Age and Basic Pension Also Need Adjustment"…A Mountain of Reform Tasks (Comprehensive)

Private Advisory Committee to Report to Special Committee on 29th
Most Issues Including Insurance Premium Rates Fail to Reach Consensus

The National Assembly's Special Committee on Pension Reform's Private Advisory Committee submitted a progress report to the National Assembly on the 29th, which essentially failed to reach a consensus on major issues such as raising the National Pension income replacement rate. The Pension Reform Special Committee is expected to extend the advisory committee's activity period and focus on discussing both structural reform and parameter reform together. However, there were also remarks that issues such as retirement age and basic pension need to be settled for pension reform.

The 'Status Review of Pension Reform Proposals' report, which the Private Advisory Committee was scheduled to present to the Special Committee on the 29th, stated that "additional review is required" on almost all current issues, from raising the National Pension contribution rate to the basic pension and the starting age for National Pension benefits. Although major issues were discussed, no consensus was effectively reached within the advisory committee.

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Regarding the most attention-grabbing issue of raising the National Pension contribution rate (the percentage of monthly income paid into the National Pension), the advisory committee summarized its position by stating, "There was a conflict between the position advocating an increase in the income replacement rate (the ratio of pension benefits to lifetime average monthly income) and the position opposing such an increase, and the differences in views were not narrowed. Although both sides agreed on raising the contribution rate, one side's argument was for raising the contribution rate based on an increase in the income replacement rate, while the other side argued for raising the contribution rate without increasing the income replacement rate, so it is difficult to say that there was agreement on raising the contribution rate."

The advisory committee said, "It is necessary to conduct scenario analyses of various alternatives based on the results of the 5th National Pension financial projection to be finalized and announced in the future," and "It is important to conduct comparative reviews based on empirical facts regarding the pros and cons of each alternative." This means that additional review work is needed based on the 5th National Pension financial projection scheduled to be submitted to the National Assembly in October.

There was consensus on raising the National Pension enrollment age, but no agreement was reached. Regarding adjusting the benefit starting age, the advisory committee said, "Since the increase in the benefit starting age is already underway, speed control is required," and "there were opinions that measures such as extending the retirement age and improving working conditions for the elderly should be implemented simultaneously."

Differences were also confirmed regarding the issue of establishing the relationship between the basic pension and the National Pension. The Special Committee stated, "Discussions concluded at the stage where multifaceted exchanges of opinions on the nature of the basic pension and long-term development directions took place." In other words, only differences were confirmed.

Regarding occupational pensions such as the Government Employees Pension, Military Pension, and Private School Teachers Pension, the position was summarized that most require further discussion. However, it included content such as "The Military Pension requires system reform reflecting the 2015 legal amendments to the Government Employees Pension, and the Private School Teachers Pension should align with the direction of the Government Employees Pension reform but requires supplementary measures for early pension benefits due to school closures."

Regarding revitalizing retirement pensions as a pillar of old-age income security, the advisory committee discussed ▲unifying the system to eliminate blind spots ▲accumulating sufficient reserves of effective scale for pension benefits ▲improving returns ▲pensionization. In this regard, the position was summarized as "In-depth research and review of improvement measures for the retirement pension system, which is a statutory mandatory system but does not sufficiently fulfill the function of old-age income security, are necessary." While retirement pensions should be supplemented to play a role in old-age income security, there was no consensus on mandatory enrollment in retirement pensions.

The Pension Reform Special Committee had planned to report a draft pension reform plan by the end of January this year, but the submission was delayed due to internal disagreements within the advisory committee and the Special Committee's focus on structural reform.

On the same day, Health and Welfare Minister Cho Kyu-hong appeared before the Pension Reform Special Committee and said, "We are collecting various opinions under the schedule to complete the financial projection by the end of this month and submit the comprehensive National Pension operation plan by October," adding, "I think we should sufficiently discuss and gather opinions before reporting the reform plan to the National Assembly and processing related laws when submitting the comprehensive operation plan."

The Pension Reform Special Committee decided to extend the activities of the Private Advisory Committee and others and leave the matter to the floor leaders of both ruling and opposition parties. Kang Ki-yoon, the ruling party floor leader of the Pension Reform Special Committee and a member of the People Power Party, explained, "Since the two co-chairmen want to have a period for this, if we leave it to the floor leaders of both parties, we will report specifically what tasks will be done and on what schedule."

Regarding pension reform, lawmakers from both ruling and opposition parties voiced that pension reform should involve a more fundamental approach beyond simply adjusting contribution rates or income replacement rates. Kim Yeon-myeong, a professor at Chung-Ang University and co-chairman of the Private Advisory Committee, said, "There are conditions that must be met for rational reform of the basic pension and National Pension," adding, "Depending on how the retirement pension system is set up, the roles and proportions of the National Pension and basic pension can be adjusted." Regarding the timing of pension benefits, he also said, "A conclusion on retirement age adjustment must be reached to adjust this part," and "If measures necessary for structural reform are to be taken immediately, institutional adjustments related to external conditions must be made quickly for proper discussions to take place."

However, skepticism about the government's willingness for pension reform was raised mainly by opposition lawmakers. There were doubts about whether pension reform could achieve results in this National Assembly session, considering the government's pension reform blueprint is expected in October and the schedule for next year's general election.

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