More welfare threatens national pension scheme

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More welfare threatens national pension scheme


With the introduction of the amended basic old-age subsidy system under the Park Geun-hye government that covers all seniors aged 65 and older with a monthly allowance of 40,000 won ($36.88) to 200,000 won, based on income and whether or not they are in the National Pension Service, an increasing number of people is opting out of the pension service, posing a threat to the system.

For the National Pension Service, February was the month it wishes to forget. For the first time in 10 years, the number of voluntary subscribers to the pension service has decreased by 6,359 this year to reach 201,531 from 207,890 last December.

Voluntary subscribers are those who are not legally bound to sign up for the pension program. Anyone aged 18 and older that is economically active is obliged to sign up for the pension service.

Housewives and those under 27 without jobs are not bound by law to sign up but can voluntarily participate in the program if they wish.

Since its establishment in 1987, the national pension service has gradually won the public trust over the years as the financial safeguard for a rapidly aging society.

The increasing number of voluntary national pension subscribers seen in the past decade has been a symbol of public trust and confidence in the pension system, until the number began to drop this year.

The growing public trust began to erode with the reformed basic old-age pension plan slated to take effect from July 2014. News reports that the Park government would fund basic subsidy plans for seniors partially through National Pension Service funds sparked a public backlash, especially from the younger generation.

Now the government says it will fund the payments entirely through taxes, but that is not enough to ease growing public discomfort in the pension service as seen by the dropping numbers of voluntary members.

Under the new senior basic government subsidy plan announced by the presidential transition team last month, those in the bottom 70 percent of income earners not covered by the national pension are entitled to receive a monthly allowance of 200,000 won once reaching the age of 65.

Those covered by the national pension service would receive between 140,000 and 200,000 won a month.

Those in the bottom 70 percent could lose up to 60,000 won if they stay in the program.

For those in the top 30 percent of income earners, those in the pension program are eligible for 40,000 to 100,000 won in subsidies, while those not covered by the pension can receive 40,000 won.

Currently, senior citizens over 65 in the lower 66 percent of earners receive 97,100 won monthly in basic government subsidy. Seniors with a higher income don’t receive any subsidies.

“The idea that it’s better to skip the national pension service and instead receive a monthly allowance of 200,000 won in a government subsidy has spread among the public,” said Yun Seok-myong, chief researcher at the Korea Institute for Health and Social Affairs.

“It has long been expected [this trend would emerge] since January when the transition team said the old-age subsidies would be linked to the pension service.”

A 46-year-old housewife who lives in Goyang, Gyeonggi, who spoke on condition of anonymity, is one of those with that perception, which led to her withdrawal from the pension service.

“I now don’t see why I should keep paying every month for the pension service while I will still be eligible for the 200,000 won subsidy in the future under the basic subsidy plan.”

In an attempt to ease growing public dissatisfaction with the changes in the pension system, Chin Young, the minister nominee for the Ministry of Health and Welfare, said Wednesday he will make sure those in the National Pension Service will not be negatively affected [by the upcoming changes] during the parliamentary hearing.

“The basic old-age subsidy should not be linked to whether or not a person is in the national pension service. Instead, the government should take into consideration income levels and amount of assets a beneficiary holds,” said an official at the National Pension Corporation, who requested anonymity.

By Shin Sung-sik, Kang Jin-kyu []
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