[EDITORIALS]Fixing the pension fundA recent three-part series in this newspaper put the 15-year-old national pension system’s ailments under the microscope. The system, which should serve as the public’s post-retirement safety net, faces the threat of default or having its bills paid by the next generation.
Simply put, those in the system get back more than they pay in. Those enrolled through their workplaces pay 9 percent of their income in premiums, half of it shouldered by employers, and receive pensions equal to up to 60 percent of their income. On average, they get double what they put in, a higher proportion than in other countries. The pension funds will be depleted by 2047. The government must raise the premium to strike a balance between spending and revenue. The seed of the asymmetry was sown at the beginning, when policymakers yielded to popular sentiment against high premiums.
Reforming the system should begin with the readiness to accept higher premiums and lower pension checks. Individuals will be reluctant to accept the notion, as it means more money out of their pockets. But policymakers should not be tempted by populism. The new administration has little room to reform the fund. President Roh Moo-hyun opposed cutting pension payments as an “allowance system.” But today’s problem has resulted from past passiveness when policymakers worried about political repercussions from a disgruntled public. Policymakers must put forth a new estimate of the pension fund’s finances at the autumn National Assembly session. They should consider lowering the pension payments by 40 to 50 percent, while raising premiums.
By 2033, the pension fund coffers are expected to grow to as much as 1,600 trillion won ($1.3 trillion) ― larger by several fold than the government budget. The fund should not play a secondary role of buoying a faltering stock market. We need a speedy reform of the system with experts who have a long-term outlook operating the fund and government intervention minimal.