[Viewpoint] The down side of the pension lotteryThe country has introduced a pension lottery, in which winners will get 5 million won ($4,700) a month for 20 years. Of course, there is an important precondition. To win, you have to buy a lottery ticket sold by the government. The Lottery Commission of the Ministry of Strategy and Finance this month introduced the pension lottery, giving 1.2 billion won for the grand prize winner.
This is the first time that the country has introduced a pension lottery. Normally a 33 percent tax is levied for a prize over 300 million won, but the rate for the pension lottery is 22 percent because the prize is paid in the form of a pension.
The lottery tickets cost 1,000 won and a drawing takes place every Wednesday evening. Every week, 6.3 million tickets are issued and two grand prize winners are picked. Therefore, the odds of becoming a prize winner is 3.15 million to 1. Only the grand prize winner will receive the money in a pension, while the second prize winners and others will receive a one-time payment. When the winner dies, the pension can be inherited by the family.
Many people who don’t have enough saved for retirement because they have been busy paying for things like their children’s education, will probably love the idea. It sounds like a good idea to the baby-boomers who were born between 1955 and 1963 and have started retiring.
These baby-boomers often worry that their life span is getting longer, while they have not saved enough money. And an incredibly attractive product - the pension lottery - has now been introduced. Even if a salaried man pays the national pension every month without missing a single payment, about 1.3 million a month will be paid in a pension when the recipient hits 65. But if you are lucky, you will be receive 5 million won a month from the lottery. This is one temptation that is hard to resist.
In fact, this lottery is so popular that it is hard to buy a ticket. The first round of 6.3 million tickets were sold out only after four days and the first winners were announced on July 6. The second round is already sold out and some stores are selling the third round tickets in advance.
At the end of 1999, the government issued special lottery tickets with a grand prize of 2 billion won. Named the Millennium Lottery, it was a only for one round. After the public was tempted by the high prize, it quickly sold out.
Lotteries are better when the prize money is high because the people who want to hit the jackpot will buy tickets. The Lotto lottery introduced in December 2002 was extremely popular. The profit from the initial stage was 10 times higher than the estimate. And the newly introduced pension lottery is also fattening the government’s pocket.
The lotteries give an illusion to the buyers that they will hit it big. But lotteries are a casino run by the government. The casino-goers often dream about hitting the jackpot, but only a few actually get lucky. Civil servants defend the lottery by saying that they just produce the lotteries and do not force anyone to buy. But the enormous prize money lures working-class people to buy lottery tickets.
The rich are less interested in the lottery because they already have enough money. They do not obsess over the extremely low possibility of winning. And people with scientific or logical minds also do not buy tickets. They do not want to waste even 1,000 won for such a low possibility of winning.
In advanced countries, it is widely accepted that lotteries are enjoyed by less fortunate people. In fact, people who barely make a living are more often the ones who buy tickets. They believe that it is the only opportunity to change their life unless they become thieves. The working-class people fatten the government’s pocket.
And yet, it does not create a serious social problem. The investment is very low. The 1,000 won ticket price won’t make a big difference in household spending, not even if you buy 10 tickets. And most of all, the pension lottery protects the grand prize winners from the known side effects of jackpots such as wasting all the money at once or creating a dispute among family members.
Lotteries are common in many advanced economies and they have a long history. The lottery also provides thrills and fun by risking a small amount of money for a potentially big prize. Waiting for the weekly drawing can provide a small amount of excitement in a boring life.
The government also engages in many public projects with the lottery profits. The problem, however, is that the people who are financing the projects through buying lottery tickets are the working-class people. Differently from taxes, lotteries are not compulsory and the buyers do not feel much resistance.
Is this why the government is treating the issue so lightly?
*The writer is an editorial writer of the JoongAng Ilbo.
By Shim Shang-bok