[2024 National Audit] Minister Jo Gyu-hong "Pension Reform Income Replacement Rate of 44% Also Acceptable"

At the Welfare Committee Audit, "Pension Reform Should Include Basic, Retirement, and Personal Pensions Together"
Recognition of the Need to Expand National Treasury Input... Support for Low-Income Groups Also Needed

Minister of Health and Welfare Cho Kyu-hong expressed a position that he could accept the proposal of a 44% income replacement rate on the premise of raising the National Pension insurance premium to 13%. He also emphasized that both parametric reform and structural reform should be carried out together regarding National Pension reform.

[Image source=Yonhap News]

Minister Cho appeared at the National Assembly Health and Welfare Committee’s audit on the 8th and responded to Democratic Party lawmaker Seo Young-seok’s question, who said, "The People Power Party plans to carry out parametric reform first in this regular session of the National Assembly and discuss structural reform next year."

Minister Cho stated, "Structural reform covers a very wide range, so if we try to do all of it, parametric reform might not be possible," but added, "Parametric reform’s insurance premium rate and income replacement rate should be accompanied by basic pension, retirement pension, and private pension, which are directly linked to the National Pension." This means focusing on parametric reform while redesigning how to secure retirement income, including basic pension, retirement pension, and private pension.

When lawmaker Seo asked about the fact that the majority of the citizen evaluation group under the Public Deliberation Committee of the 21st National Assembly Pension Reform Special Committee chose the option of "13% insurance premium rate - 50% income replacement rate," and inquired, "Will you exercise a veto if the income replacement rate exceeds 44%?" Minister Cho replied, "No, I will not."

When Seo asked again, "Are you willing to accept what is discussed in the National Assembly?" he said, "The government will also support sufficient discussions in the National Assembly."

Regarding criticism that the pension amount increase rate is low when an automatic adjustment mechanism is introduced, Minister Cho explained, "The automatic adjustment mechanism varies greatly depending on when it is triggered and at what level," adding, "It is necessary to introduce it so that the benefit amount automatically changes according to rapid demographic changes."

In this regard, Democratic Party lawmaker Park Hee-seung argued that activating private pensions, which are mainly received by high-income groups, instead of expanding National Pension benefits through the introduction of an automatic adjustment mechanism, will worsen retirement polarization in the future.

Lawmaker Park said, "Other public pensions such as disability pension, government employee pension, military pension, and private school teacher pension also increase pensions in proportion to inflation, but under the government’s plan, only the National Pension will receive benefits that are far below inflation," and asked Minister Cho, "Is there a reasonable reason to treat only National Pension subscribers differently?"

Minister Cho replied, "No, there is not," and added, "It is true that the actual increase in benefit amounts is currently limited, but the amount reduced varies depending on how the automatic adjustment mechanism is designed."

When lawmaker Park pointed out that Korea’s public pension government funding is insufficient by citing cases from Japan, Sweden, Germany, and other countries, Minister Cho explained, "I think government funding should be further expanded. I also agree that support for low-income groups needs to be expanded," and added, "The government’s reform plan includes expansion measures, and separately, it also includes plans to raise the basic pension."

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