Pension reform doubts

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Pension reform doubts

The reform plan announced yesterday by the public employee pension development committee is, in a word, disappointing. The plan seems too passive, not making any fundamental changes in the system, such as solving the issue of mandatory subscription to the national pension. The main area of contention was that the deal was designed in a way that privileges public employees.

Under the plan, subscribers’ contributions will go up, but they will get back a similar amount of money. Even with the reform, public employees are still subject to 60 percent more benefits than those who subscribe to the national pension plan, so the debate over fairness will continue.

The degree of reform was minimal because of public employee opposition to the change. Public union representatives joined the committee in June, and the reform plan since softened significantly. As a result, there is criticism that the reform discussion was left to public employees while the Ministry of Public Administration and Security played the role of referee, despite the fact that they are going to be most affected by it.

It is difficult to understand the argument of public employees that they need to get higher pension payouts after they retire than the general public. They do not work more than those employed in the private sector, nor are they more competitive.

Moreover, the government is making up for pension losses with tax money. The compensation amounts to 3 trillion won ($2.6 billion) so far and is expected to top 30 trillion won in the next 10 years. Under the reform plan, the government will have to continue to support retired public employees with tax money. The Ministry of Public Administration and Security intends to submit a legislative revision proposal based on the plan to the National Assembly this fall. There is still time. There needs to be more discussion on the issue through public hearings. The public employee pension system should eventually be absorbed by the national pension. This is the global trend.

The two-year-long public employee-led discussion on the reform has reached its limit. It is time for the plan to benefit from some outside perspective. As President Lee Myung-bak promised, the government should take the initiative in reforming the public employee pension as part of wider administrative reforms. In order for smooth changes to be made to other pensions, such as those of teachers or the military, the public employee pension reform needs to succeed.
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