[Editorial] National pension reform for future generations

The agenda for legislative discussions on national pension reform has been set. On Monday, an outside advisory board to the National Assembly’s special pension reform committee said it will design the outline for the reform with the goal of proposing higher premiums and income replacement rate, as well as lifting the age for subscription and reception. In a nutshell, the design will change the current system of contributing small and receiving big.

According to a government estimate in 2018, the national pension will sink in the red in 2042 and run completely out of reserves in 2057. The National Assembly Budget Office sees the depletion arrive faster by 2055. At the current rate, a person born in 1990 will not receive a cent at age 65. Still, the previous government did not try to take the unpopular step of correcting the pension system to prevent it from running out of money.

The private advisory board proposed the reform direction be aimed at stabilizing pension finance, heightening security, and guaranteeing minimum comfort in old age. The current premium rate of 9 percent is just half the 18.2 percent average of OECD member countries. By raising the premium, it wants to increase the income replacement ratio from 40 percent expected in 2028. (In 1988, the starting year for the national pension, the income replacement ratio was 70 percent.) The automatic cut in social pension payouts when subscribers reach a certain age could be considered, as done in Germany and Japan.

If we leave the pension system unattended at the current low birth rate and fast aging, our future generations could be overburdened. Stressing the need for pension reform, President Yoon Suk Yeol last month vowed not to avoid “my historical duty and responsibility.” The government will announce the revised estimate for pension finance in March and present a roadmap for reform in October.

For the roadmap to take effect, it needs cooperation from the legislature. After the advisory board completes its recommendation outline, the special committee will discuss it until the end of April. Given the consensus on the need for reform, rivalling parties are expected to tackle the issue. But the move could be stalled or even chucked away as we get closer to the parliamentary election in April next year.

The outline from the private advisory board has few new ideas, as they have been raised from past governments. But since the issue has been raised, reform outline should be completed. Supplementary policy discussions are also needed as the reform is associated with the basic pension for the vulnerable and retirement age changes. The rivalling parties must set aside differences for sincere discussions for our future generation.