Hands off the pension program

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Hands off the pension program

The new government’s plan of providing basic monthly allowances for senior citizens from the age of 65 is starting to have an impact on the National Pension Service. According to the service, voluntary subscribers dropped by 7,223 to total 201,531 last month. Apparently, more than 10,000 housewives dropped out of the voluntary pension scheme for the first time in 10 years. The warning that separate welfare payments for seniors would hurt the credibility of the national pension program may be coming true.

People without regular work or income can make contributions to the pension plan starting with a minimum of 89,100 won ($82), and subscribers have been increasing since 2004 because the national pension scheme was considered the safest and best saving plan for getting by in old age.

The number of voluntary subscribers began to drop because of the new government’s plan to give a more generous basic monthly allowance to seniors from July of next year. Seniors in the bottom 70 percent of income earners who are not eligible for a national pension will get at least 200,000 won monthly. The remaining senior citizens will receive extra basic allowances depending on how much they get from their national pension. The poor elderly person who has contributed to the national pension scheme could actually get 60,000 won less. It is no wonder people want to withdraw from the pension when they are assured of 200,000 won in basic allowances.

The national pension scheme could face a run in deposits. It was engulfed by a similar panic in 2004. People withdrew from the national pension fund amid rumors that it would soon run out money.

The government is undermining the hard-won credibility of the national pension by linking its new welfare policy to it. It must undo the damage while it still has the opportunity. President Park Geun-hye said funding for the senior welfare payments should come from taxes and not at the expense of other public finances. But her transition team at first proposed that it use the national pension fund for funding because it could not find stable funding elsewhere.

Strictly speaking, the seniors allowance is a type of public benefit program and not a pension. It should be separated from the contribution-based social security program. The national pension must first provide for the late lives of its 20.28 million contributors. They must not be further provoked. The funding for senior welfare payments should come from taxes as the president wisely proposed. It’s a matter of both wisdom and fairness.
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