Don’t delay public pension reform

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Don’t delay public pension reform

The government is making another attempt to fix the deficit-ridden pension program for government employees. The Ministry of Security and Public Administration plans to create a committee to work on ways to shape up the government employee pension scheme within the first half of the year. It will report the plan to the president next month. The state pension scheme - exclusively for government employees - has piled up debt since 1993. More than 10 trillion won ($9.44 billion) has been spent to subsidize the generous pension program for civil servants. By 2022, the pension’s deficit will reach 46 trillion won. It is urgently in need of a major fix.

Reforms to the government employee pension scheme have been slow over the past two decades. Slight tweaks were made on four revisions that did little to ease the deficit. In 2008, a government committee unveiled a reform outline, but those actions were in vain. The original plan was to increase insurance rates and sharply decrease rewards. However, it backed down due to resistance from government employees. The package was wrapped up hastily with a compromise to increase the payment age to 65 from 60 starting with employees recruited in 2010. It is no wonder the new attempt hardly sounds credible. What makes the incumbent government think it will be successful this time?

But if the fix goes up in smoke again, society likely won’t tolerate it. Pensioners of government employee schemes collect nearly triple the amount of rewards than in the Contribution-based national pension program. Reforms on other state-funded pensions won’t gain support if the mostly money-losing pension program remains intact. No government employees would wholeheartedly welcome such a move, which would mean higher monthly contributions and less benefits after retirement. Yet if civil servants don’t act first, no civilian would agree to the pension reforms.

Government employees are expected to exceed one million this year. An increase in the number would be inevitable in order to sustain a welfare state that would require more administrative works. But if the pension operations are left untouched, future generations would face fiscal catastrophe. Reforms in the government employee pension system can no longer be postponed. A key member of the ruling Saenuri Party indicated that reform would be finalized within the year. But the reform work should include more civilian experts. Reform led by government employees won’t produce any results. Other pending reform works in the public sector - such as in debt-ridden public institutions - could gain momentum with the pension overhaul.
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