One more effort to fix pension ills

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One more effort to fix pension ills

The pension system for government workers, widely considered unfair to private-sector workers despite several recent rounds of tinkering, has drawn public demands for reform for years. But civil servants, if they are interested at all, seem to think government plans for change are all talk and no action.

“Will there be reform in the pensions of civil servants this time around?” asked a 48-year-old national government supervisory worker named Lee rhetorically. “Even if it does, it won’t affect me anyway.”

Lee, who has spent 20 years as a civil service worker, noted, “It is unclear if the pension policy will ever be properly reformed, and even if it is, the new system will only apply to new workers.”

The Park Geun-hye administration, in collaboration with the ruling party, is working to reduce deficits in the pension system for public employees and members of the military, but the overhaul is not expected to be easy. As of last year, the pension scheme for government workers has accumulated a 12.2 trillion won ($12 billion) deficit.

“Until now, attempts at pension policy reform have fizzled many time, so the people, and of course civil servants, are showing some cynicism,” said Kim Seon-taek, chairman of the Korea Taxpayers Association. “[Reform of pension policy] has to be done this time around while public opinion is positive, and the government also shows a firmer intention to reform it than ever before.”

The pension system for public service has long been criticized for the disparity of benefits for retired civil servants compared with those for workers under the national pension scheme.

Last year, the average monthly pension paid to retired civil servants was 2.19 million won, 2.6 times the average payment received by pensioners under the national system, 840,000 won.

Civil service pensions are set at 62.7 percent of their average recent income before retirement, while the figure is 51.3 percent for those under the national pension scheme. Public officials can also retire at age 60, while national pensioners cannot begin to collect a pension until age 65.

“We are very well aware of the critical viewpoint of the people,” Park Kyung-kook, first vice minister of security and public administration, said recently. “There is sympathy among public officials for a ‘give more and receive less’ reform plan for the pensions of civil servants.”

But past administrations’ plans to reform the civil service pension program all failed to materialize. The failure was in part because of backlash from present government workers, but some critics say presidents have not wanted to raise the ire of bureaucrats by pushing strongly for reforms while they were in office.

The first recent discussions to reform the civil servant pension system were in 1995 during the Kim Young-sam administration; the plan was scrapped.

In 2000, the Kim Dae-jung administration pushed for pension reform through a plan developed and pushed by the Korea Development Institute. There was some progress, such as setting the minimum age of eligibility to receive a civil service pension at 60. Before that, a pension was available to officials who accrued 20 years of service regardless of their age.

Further talk of reform gained momentum during the Lee Myung-bak administration. In 2009, a joint private-public sector committee to improve the civil servant program was set up. The committee discussed raising civil servants’ pension contribution rate from 5.5 percent to 8.8 percent, and decreasing the pension from 76 percent of average salary for the last three years of service to 56.1 percent. There was also talk of raising the age of eligibility for a pension from 60 to 65.

But in the end, the contribution rate was increased to 7 percent and the pension benchmark was lowered to 62.7 percent of a worker’s average salary.

Yun Suk-mung, a senior researcher at the state-run Korea Institute for Health and Social Affairs, who was a member of that joint committee, said, “The majority of the committee was civil servants, civil servant unions and bureaucrat-friendly professors; hence, whenever a reform plan was submitted, they declared it was ‘too radical and cannot be accepted.’”

Yun added, “They agreed to save the items initially discussed for later consideration, but even that did not happen.”

Experts say there is a need for more transparency in planning reforms for the system to be brought into line.

Kim Won-shik, an economics professor at Konkuk University, said, “Civil servants and pension experts need to reform the pension system to meet the expectations of the people, but are not doing so. Reform should not be talked about in a secret room, but be made transparent through increased participation by the people. A public hearing should be held so planners can hear the bitter words about civil service pensions first.”

Other analysts suggest that in the long term, the civil service and national pension systems should be combined, while giving public officials some other incentives.


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