Saenuri details its overhaul of public pensions

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Saenuri details its overhaul of public pensions

The ruling Saenuri Party yesterday unveiled an ambitious plan to overhaul the debt-ridden pension system for government employees with an aim to reduce taxpayer money needed to keep it afloat by 47 trillion won ($44.6 billion) by 2027.

As part of its package, the Saenuri proposed delaying the eligibility age for government pensions to 65 by 2031. Starting in 2023, it will push back the eligibility age by one year starting from the current age of 60.

The Saenuri also said it will try to increase the monthly contributions by civil servants to the system by 3 to 10 percent of their incomes by 2018. While those working in government offices now will have to increase their contributions under the Saenuri’s plan, bureaucrats entering the system from 2016 will only pay 4.5 percent of their incomes - just like workers in the private sector who contribute to the National Pension System - and their benefits will not be as generous in the future.

Under the Saenuri’s plan, a civil servant employed at the lowest grade in 1998 will have to boost his or her total pension contributions by 17 percent as compared to now, and the total sum of payouts will be cut by 15 percent after retirement 30 years later.

At a much-anticipated press briefing yesterday, Rep. Lee Hahn-koo, who heads the party’s task force on the bill, said change is inevitable because too much of taxpayers’ money is being swallowed up by the pension system.

“Every 10 years, 10 trillion additional won from state coffers will be required to keep the program going if it remains untouched,” said Lee, calling such a scenario “disastrous.”

According to the Saenuri, the government has spent 12.2 trillion won covering losses incurred by the pension system between 2001 and 2013. The party also said it will cost the government 53 trillion won in taxpayer money over the next 10 years to keep the system as it is today.

The Saenuri projected that the government will save 47.7 trillion won over a 12-year period from 2016 through 2027 with the reform because it will spend 46.1 trillion won covering deficits compared to 93.8 trillion won.

The Saenuri is planning to submit a pension bill today with Chairman Kim Moo-sung, who will sponsor the bill on behalf of the party’s 158 lawmakers. The Blue House wants the bill passed by the end of the year.

Reining in the civil-servant pension plan has become a hot potato in the political sphere amid rising public sentiment that retired government workers get overly generous pension benefits.

According to government data, former bureaucrats receive 2.19 million won in average monthly pension payouts, while the national pension system average is almost one-third of that, at 840,000 won. But civil servants argue their generous pensions are compensation for salaries much lower than in the private sector.

Rep. Lee of the Saenuri scoffed at such claims. “No private company in the country offers as much job security to their workers as the public sector does,” he said.

The Park Geun-hye government wants the ruling party to lead the way on the reform. It expects minimal political repercussions because no major elections are scheduled for next year.

It took less than an hour for a labor union representing government employees to reject the plan outright. It promised a massive protest rally with as many as one million union members in Yeouido Park, western Seoul, on Saturday.

“I have never seen a country that does pension reform without any consultation with those to be affected,” said Lee Chung-jae, president of the Korean Government Employee Union.

“While I agree that the pension system requires all-around reform, it is important that we have a social consensus through consultations with those who will be affected,” said Rep. Woo Yoon-keun, floor leader of the opposition New Politics Alliance for Democracy.


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