NPAD presents plan to overhaul civil servant pension system

Politics

NPAD presents plan to overhaul civil servant pension system

Published: 25 Mar. 2015, 20:49

The main opposition party announced its own plan to reform the deficit-stricken state-run pension system for civil servants, proposing that officials contribute more and receive more than earlier suggestions presented by the government and the ruling party.

On Wednesday, the New Politics Alliance for Democracy (NPAD) held a press briefing at the National Assembly to explain its plan.

“In order to guarantee a certain level of income after retirement, the payouts for rank-and-file civil servants will remain unchanged,” said the opposition’s chief policy maker, Rep. Kang Gi-jung. “In the meantime, our plan seeks to increase contributions by public servants in order to keep the pension afloat.”

The NPAD added that it would manage, in association with the National Pension Fund, a portion of the pensions for public servants. The pension system for civil servants has been criticized over the disparity in benefits between retired bureaucrats and those under the national pension plan.

In February, President Park Geun-hye promised to reform the deficit-stricken state-run pension system for civil servants. The pension system has an accumulated deficit of more than 12.2 trillion won ($11.08 billion) as of last year. In 2013 alone, the government provided nearly 2 trillion won to make up for those losses.

As of now, public servants are contributing 7 percent of their salaries to the pension, and receive payouts based on average salary and the number of years on the job at an accrued rate of 1.9 percent. Kang said public servants will pay more than 7 percent in contributions and receive payouts with a less than 1.9 percent accrual rate.

But even though the NPAD did not unveil specific numbers, leaving it up to future negotiations, sources told the JoongAng Ilbo that contributions would be increased to 9 or 10 percent. According to the draft proposal obtained by the JoongAng Ilbo on Tuesday, the accrual rate for pension payouts would be lowered from 1.9 percent, at 1.45 to 1.7 percent.

Under the current system, a public servant with a 3 million won monthly salary pays 210,000 won in contributions. Those contributions will be increased to 270,000 won to 300,000 won under the NPAD’s plan.

After 30 years of service, the public servant would receive 1.71 million won in payouts, but that amount will be decreased by up to 405,000 won under the opposition’s proposal.

The Saenuri Party unveiled its proposal for increasing contributions to 10 percent, while lowering the accrual rate to 1.25 percent. Under the ruling party’s plan, the same public servant would contribute 300,000 won per month, while receiving 1.125 million won in monthly payouts post-retirement.

To complement lower payouts, the Saenuri Party promised that it will increase severance payments to match those in the private sector, while the NPAD has no plan to change it.

The NPAD argues that 84 percent of rank-and-file public servants will be able to receive the same payout - up to 57 percent of their average salaries.

“The Saenuri Party proposal will save 266 trillion won by 2080, but our plan will save 321 trillion won - 55 trillion won more,” an NPAD official said.

The NPAD proposal was made public only three days before the self-imposed deadline by the pension reform committee. The government, political parties and labor unions for public servants had agreed that they would conclude a reform plan by Saturday, the expiration of the mandate for the committee.

The Saenuri Party, meanwhile, criticized the NPAD on Wednesday for presenting an “extremely disappointing” proposal.

“It’s not even enough to uphold the idea of reform,” said Rep. Kim Young-woo, the Saenuri spokesman. “Instead of clear figures, the proposal just contained ambiguous expressions. We wasted our time to wait for their plan.”

An association of public servants’ unions also rejected the NPAD’s idea.

“Until now, the government and the Saenuri Party had presented distorted views,” said Byeon Seong-ho, the head of the Korea Teachers and Education Workers’ Union. “And today, even the NPAD betrayed the promise to consult with us and presented its own plan.”

The government finalized its plan in February, while the Saenuri Party made public its proposal in October.

Professor Kim Tae-il of Korea University also presented a separate reform plan.

Unless the pension reform committee fails to reach an agreement, the matter will be handed over to the National Assembly’s special committee on pension reform.

BY SER MYO-JA [ser.myoja@joongang.co.kr]