The Korea Herald


Rival parties lock horns over state pension reform plan

By Jung Min-kyung

Published : April 30, 2024 - 15:24

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The parliamentary pension reform committee holds a meeting at the National Assembly in Seoul on Tuesday. (Yonhap) The parliamentary pension reform committee holds a meeting at the National Assembly in Seoul on Tuesday. (Yonhap)

The rival parties clashed on Tuesday over the possibility of adopting a new state pension reform plan, which pushes for an increase in contributions for a bigger future benefit.

The new pension reform plan is based on a survey conducted and released by the parliamentary special committee on pension reform on April 21. The survey, which involved 500 respondents across the country aged 18 or older, showed that 56 percent preferred to pay significantly larger contributions to the National Pension Service for bigger benefits. On the other hand, 42.6 percent favored paying slightly larger contributions and maintaining the current payout level, which observers see as a more sustainable solution for the public pension fund in an aging society. Some 1.3 percent said they were uncertain of both plans.

The main opposition Democratic Party of Korea seeks to uphold the scenario preferred by more than half of the respondents in the survey, while the ruling People Power Party questioned the fairness of such a reform plan.

“(The scenario upheld by the main opposition) fails to reflect the opinions of the Korean citizens who are currently 10 years old or younger,” People Power Party Rep. Yun Chang-hyun said during a meeting of the pension reform committee held at the National Assembly in Seoul on Tuesday.

“It asks citizens who are born today to pay 43 percent of their income (to the NPS) when they reach 40 years old,” he added.

People Power Party Rep. Kim Mi-ae echoed Yun, pointing out that the scenario could put a strain on the state finances.

“(The plan) is concerning in terms of the country’s fiscal stability and (the well-being) of the future generations,” she said at the meeting.

Countering the ruling party lawmakers’ remarks, Democratic Party Rep. Lee Yong-woo said that the survey has “made it clear for the country” to adopt such reform to the state pension program while highlighting the need to uphold the opinions of the majority in the survey.

In April, a public consultation body under the parliamentary pension reform committee conducted a survey asking the survey respondents which of the two plans they favored after holding a total of four rounds of debates in the same month.

The scenario currently preferred by the majority of respondents involves increasing the contribution rate by 4 percentage points to 13 percent from the current 9 percent of a subscriber’s monthly income. The NPS will then raise the payout, which is the percentage of a worker's pre-retirement income paid out by a pension program after the worker retires, by 10 percentage points to 50 percent from the current 40 percent.

The other scenario, which was less favored by the respondents, is to increase the contribution rate by 3 percentage points to 12 percent from the current 9 percent, but freeze the payout at the current level of 40 percent. Supporters of this plan claim that it will keep the state pension program afloat for a longer period of time.