By Oh Seok-min
SEOUL, Oct. 27 (Yonhap) — The government on Friday announced a plan to “gradually” raise the national pension contribution rate as part of efforts to improve the financial soundness of the system amid population aging, but stopped short of presenting detailed reform measures.
Revamping the national pension system is one of President Yoon Suk Yeol’s key agenda items owing to deepening concerns that the state-run pension fund could be exhausted sooner than expected due to rapid aging.
The state-run National Pension Service said earlier that the fund is projected to be depleted in 2055 after recording a shortfall beginning in 2041.
Under the comprehensive plan on pension management, the Ministry of Health and Welfare said the gradual hike in the pension contribution rate is “inevitable” to ensure the sustainability of the program, and vowed to strive to differentiate the increase rate among age groups to ensure fairness.
The ministry noted that South Korea’s rate level comes to just half the level set by member nations of the Organization for Economic Cooperation and Development, and it will review “the proper level in consideration of drastic demographic changes” without specifying details.
Parliamentary audit of gov't agencies
Health Minister Cho Kyoo-hong speaks during a parliamentary inspection of his agency at the health and welfare committee of the National Assembly in Seoul on Oct. 25, 2023. (Yonhap)
The proposal also did not specify the potential adjustment of the nominal income replacement rate by simply saying that related discussions will continue in line with the reform path.
The rate sets the amount of receivable pension after retirement, and some have called for its increase so as to allow people to receive more.
The ministry called for reviewing the further delay of the age that retirees receive payouts, which would be possible after the country secures “better conditions regarding the employment of senior citizens.”
Currently, the entitlement age of the benefit was set at 63, and is supposed to go up to 65 in 2033.
The proposal will be submitted to the National Assembly following the deliberation of the Cabinet and approval by Yoon.
“The government will fix the details after gathering public opinions in cooperation with the parliamentary pension reform committee,” a ministry official said.
Last year, the National Assembly kicked off a special committee on pension reform.
This file photo taken Sept. 9, 2023, shows an office of the National Pension Service in Seoul. (Yonhap)
The government has requested a gradual rise in the national pension premium rate as part of its efforts to improve the financial stability of the system in the face of population aging. The Ministry of Health and Welfare has stated that the increase in the rate is essential for the sustainability of the program, and vowed to differentiate the rate among different age groups for fairness. The ministry also mentioned that South Korea’s rate is only half of the rate set by the Organization for Economic Cooperation and Development, and is looking to review the proper level in consideration of the drastic demographic changes.
The proposal did not specify the potential adjustment of the nominal income replacement rate, but discussions will continue in line with the reform path. Additionally, the ministry called for reviewing the further delay of the age that retirees receive payouts, which is currently set at 63 and will go up to 65 in 2033. The proposal will be submitted to the National Assembly after the Cabinet’s deliberation and President Yoon’s approval.
graceoh@yna.co.kr
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