Abandoned pension reform

Because the Moon Jae-in government has neglected the much-needed reform in national pension, the burden on the people has increased from 15 trillion won ($12.5 billion) to more than 21 trillion won. The warning came from a ruling party member. Democratic Party Rep. Choi Hye-young scorned the government for increasing public burden by putting off reform.

Nation pension is bound by the law to examine and fix pension finance every five years. In a 2018 estimation, the pension was expected to slip into the red from 2042 and entirely run out of reserves from 2057. The National Budget Office in the National Assembly projected the doom year would be advanced to 2054. The fund cannot last if beneficiaries pick up more than they paid. A reform was imperative by either raising the premium or adjusting down the payout ratio against lifetime salary.

Since pension reform will likely be designed to increase monthly dues while reducing the benefits, no government can willingly take up the task. But all past governments amended the premium and payout rate despite the inevitable toll on their approval rating. Only the Moon Jae-in administration has never attempted to fix the pension system. The burden has been translated onto the next government. Senior citizens’ security has become more unstable as a result.

Instead of carrying out reform as a preemptive response to urgent demographic challenges from the ultra-low fertility rate and fast aging, the government only undermined the stability of the fund through political appointments. The Blue House appointed Kim Sung-joo as board director of the National Pension Service in Jeonju, North Jeolla so that he can care for his constituency after he lost a parliamentary election in the city in 2016. He mostly showed face for political purpose and resigned a year before his term ended in order to run in the April 15 election last year.

The board seat had stayed empty for eight months after it was deserted by Kim and was replaced by former Vice Finance Minister Kim Yong-jin after he lost the parliamentary election last year. He also would be interested in politics, not managing the fund.

No presidential contestants, including Gyeonggi Gov. Lee Jae-myung who was elected presidential candidate of the ruling Democratic Party, presented an outline to reform the pension fund. A leader with an eye on the future must come up with a roadmap to reform the national pension.