Pension Reform Passed in Welfare Committee Plenary Session of the National Assembly After 18 Years (Update)

Welfare Committee Holds Consecutive Subcommittee and Full Meetings
National Pension Contribution Rate to Rise to 13% Over Eight Years
Income Replacement Rate Also Increased from 40% to 43%

The National Assembly's Health and Welfare Committee passed an amendment to the National Pension Act on the 20th, which includes a reform plan for the National Pension that raises the contribution rate (amount paid) from 9% to 13% and the income replacement rate (amount received) from 40% to 43%. This law, which signifies pension reform for the first time in 18 years, is expected to pass through the Legislation and Judiciary Committee and the plenary session thereafter.

On the same day, the Welfare Committee consecutively held the 2nd Subcommittee on Bills and a full meeting in the afternoon to pass the amendment to the National Pension Act. According to the amendment, the contribution rate will increase by 0.5 percentage points annually over eight years. The income replacement rate will rise from the current 40% to 43% starting next year. This amendment is based on the agreement titled 'Agreement on Pension Reform' reached earlier that morning between National Assembly Speaker Woo Won-sik and the ruling and opposition floor leaders.

Speaker of the National Assembly Woo Won-sik, People Power Party Floor Leader Kwon Seong-dong, and Democratic Party Floor Leader Park Chan-dae are announcing the agreement on the National Pension reform plan in the Speaker's office on the 20th. From the left: People Power Party Rep. Kim Mi-ae (Health and Welfare Committee Secretary), Park Hyung-soo, Senior Deputy Floor Leader, Kwon Seong-dong, Floor Leader, Woo Won-sik, Speaker, Democratic Party Floor Leader Park Chan-dae, Park Seong-jun, Senior Deputy Floor Leader, Kang Seon-woo (Health and Welfare Committee Secretary), Park Ju-min (Chairman of the Health and Welfare Committee). Photo by Kim Hyun-min

Regarding pension reform, the ruling and opposition parties showed differing views on whether to proceed with structural reform simultaneously or to prioritize parametric reform first. With the passage of the pension reform plan this time, parametric reform will begin first, followed by discussions on structural reform through a special pension reform committee.

The pension reform passed this time includes improvements not only to the contribution rate and income replacement rate but also to military service and childbirth credits. The credit applied to those who have completed military service will be extended from the current 6 months to a maximum of 12 months, and the childbirth credit, which currently applies additional subscription periods from the second child onward based on the number of children, will be expanded to include the first child as well.

If it passes the plenary session, this pension reform will be the first in 18 years since 2007 and the third pension reform since the introduction of the National Pension in 1988.

After this amendment to the National Pension Act, which corresponds to parametric reform, the ruling and opposition parties agreed to form a special pension committee to discuss structural reform as a follow-up task. Structural reform is expected to include multi-layered measures such as the introduction of an automatic stabilizer and reforms of the national, basic, retirement, and private pensions.

Immediately after the National Pension amendment passed the Welfare Committee, Park Ju-min, chairperson of the Health and Welfare Committee (Democratic Party), remarked, "As many have said, this seems to be just the beginning," adding, "The fact that we agreed to start and processed this shows that other amendments or reforms can also be carried out swiftly in the future."

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