The Korea Herald


[Editorial] No time to delay reform

Policymakers, mindful of election, must not avoid tackling critical pension reform

By Korea Herald

Published : Oct. 5, 2023 - 05:30

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The Yoon Suk Yeol administration is scheduled to unveil a blueprint for public pension reform this month, but there is only a slim chance that any meaningful progress will be made any time soon.

One of the reasons for such a pessimistic view is that the lawmakers from both parties agreed to effectively put aside the pension reform issue until after next year's general election.

The ruling People Power Party and the main opposition Democratic Party of Korea on Monday agreed to extend the operation period of a special committee on pension reform at the National Assembly from the end of this month to the end of May.

The latest move came after both parties had already extended the term of the special committee for six months in April. The back-to-back delay in fleshing out pension reform details is not unexpected but still deeply regrettable, as the issue is more urgent than ever.

Rep. Joo Ho-young of the People Power Party earlier pledged to complete the pension reform within the current session of the National Assembly. But after one year of wasting time, the job of overhauling the problem-laden pension scheme is now likely to be passed over to the next session of the National Assembly that will be formed after the general election next year.

The special committee cited the need for establishing two additional subcommittees to collect more public opinions on pension reform as a reason for extending its term. But it made a similar reason in April and then idled away its time without coming up with any specific conclusions.

Critics say that the committee’s repeated excuses are just a thinly-veiled attempt to avoid fulfilling its responsibilities. After all, any reform on the current pension system would result in forcing subscribers to “pay more and receive less,” a much-dreaded change that is feared to spark a backlash from voters.

With the political circles gearing up for the general election, lawmakers are reluctant to make any self-defeating step and lose potential votes.

But lawmakers’ collective move to stay away from the explosive and deeply unpopular issue of pension reform can worsen the outlook for addressing the problems with the current pension scheme.

The National Pension Service released the results of a projection early this year that showed the pension fund on track for depletion by 2055, unless drastic reforms are taken by the government and the National Assembly.

The NPS argued that it will have to raise the pension premium rate from the current 9 percent of reported income to 22.54 percent in 2035 to keep the pension fund from recording a deficit from 2041.

But raising the premium rate is easier said than done. Last month, a national advisory committee on pension reform under the wing of the NPS suggested a pension rate hike to at least 15 percent and recommended the starting age of pension payouts to be raised from 65 to 68. The proposal touched off loud criticism from the public.

In consideration of the hostile public opinion, the government could find it tricky to include substantial reform measures when it submits its blueprint to the National Assembly later this month.

However, policymakers must not delay the discussion on pension reform. The National Pension Research Institute estimates that pension payouts will surge by 56 percent in the next three years as many of Korea’s baby boomers who were born between 1955 and 1963 are retiring. Some experts claim that drastic pension reforms should be implemented now, especially before the second generation of baby boomers born between 1965 and 1974 begin to retire.

Other related conditions are also turning negative. Birth rates continue to a fresh low and the aging of Korean society is accelerating. Given the high stakes of pension reform, policymakers at the government and the National Assembly must take up the task without delay.