Reforming Korea's national pension system: What are the election candidates promising?

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Reforming Korea's national pension system: What are the election candidates promising?

Published: 01 Jun. 2025, 07:00

CHO JUNG-WOO
[email protected]

Audio report: written by reporters, read by AI

A person visits the National Pension Service office in Seodaemun District, western Seoul, on March 18. [NEWS1]

Reforming Korea’s national pension system is both urgent and necessary, but remains a politically sensitive issue. Unlike the previous presidential election, where candidates largely avoided pledging pension reform, the key contenders in the June 3 presidential election are now placing it among their top 10 campaign pledges.

“All governments hesitate to reform the pension system because it’s so complex,” Democratic Party (DP) presidential candidate Lee Jae-myung said during the second televised debate held last Friday.

“There is no solution that satisfies everyone,” he added, noting that the bipartisan agreement to raise the contribution and income replacement rates in March was a positive step, one that should have been taken instead of doing “nothing at all.”

From left: Lee Jae-myung of the Democratic Party, Kim Moon-soo of the People Power Party, Kwon Young-gook of the Democratic Labor Party and Lee Jun-seok of the Reform Party pose for a photo ahead of the second televised presidential debate on May 23 at the KBS studio in Yeongdeungpo District, western Seoul. [JOINT PRESS CORPS]

People Power Party (PPP) presidential candidate Kim Moon-soo promised major additional reforms.

"We will immediately begin a second round of structural reform," Kim said during the debate, pledging to incorporate the voices of younger generations, acknowledging their backlash against the recent amendment.

The candidates' pledges largely come after the National Assembly passed its first amendment of the national pension scheme in 18 years on March 20. However, observers view the measure as more of a technical adjustment than a true reform, which raises the contribution rate gradually from 9 percent to 13 percent over time and the income replacement rate from 40 percent to 43 percent next year.

The contribution rate refers to the portion of a worker’s salary paid into the pension system, while the income replacement rate represents the percentage of a retiree’s income that will be covered by the pension.

Why is pension reform urgent?

As Korea grapples with a plummeting birthrate and enters a “super-aged” society, concerns are growing over the sustainability of the national pension fund. The shifting demographics, in particular, with fewer people paying into the system and more drawing from it, are straining the fund's long-term viability.

Senior citizens wait in line for free meals at Tapgol Park in Jongno District, central Seoul, on May 12. [NEWS1]

The National Pension Service, which reviews the fund’s outlook every five years by law, projected that the fund would begin running a deficit in 2041 and be depleted by 2055. That depletion date was revised last year to 2056.

Under the latest amendment to the pension system, the projected depletion date has been pushed back further to 2064. However, that still means a 25-year-old today would likely be ineligible to receive benefits, which begin at age 65, by the time the fund is exhausted.

The younger generations argue that the reform does little to solve long-term problems. According to a Gallup Korea survey conducted from March 25 to 27, 60 percent of respondents in their 20s and 30s opposed the amendment. Overall, 38 percent of the 1,000 respondents supported it, while 41 percent were against it.

Former President Yoon Suk Yeol also included pension reform as one of his major four reform plans to complete under his administration before his ouster.

Student representatives from the Student Union Forum, comprised of students from universities including Seoul National University, Yonsei University and Korea University, speak at a press conference calling for a revision to the latest pension reform scheme at the National Assembly in Yeouido, western Seoul, on March 24. [NEWS1]

What are the candidates proposing?

Lee Jae-myung (Democratic Party)

In his top 10 campaign pledges, Lee promises to build a society where everyone — from children to senior citizens — is guaranteed a stable livelihood. His approach includes a “consistent push for pension reform” and efforts to “eliminate blind spots” in the current system.

While acknowledging the structural issues within the national pension, Lee emphasized during the debate that reforms must be gradual. Specifically, he proposed extending pension “credits” for conscripted military service to cover the full 18 months and granting young people longer periods to be recognized for eligibility. Currently, a minimum of 10 years of contributions is required to receive pension benefits.

People Power Party presidential candidate Kim Moon-soo, who served as the labor minister at the time, criticizes the latest pension reform during a protest at the National Assembly in Yeouido, western Seoul, on April 11. [NEWS1]

Kim Moon-soo (People Power Party)

Kim has centered his pension reform agenda on young voters, especially those in their 20s and 30s who have expressed frustration over the recent amendment, which takes effect on Jan. 1, 2026.

“The reform has devastated the youth,” Kim said during the debate, advocating for the adoption of automatic adjustment mechanisms (AAMs). According to the International Monetary Fund, AAMs are rules that allow pension systems to automatically respond to demographic and economic changes, reducing the need for political intervention. These mechanisms have already been adopted in 24 OECD countries, including Japan.

While AAMs could extend the pension fund's life by up to 14 years in Korea, critics warn they might lead to reduced payouts for future retirees, which is a concern that has stirred resistance in the past.

Lee Jun-seok (Reform Party)

Lee has proposed splitting the current pension scheme into two: a “new” system for younger people and the “old” one for older generations, which is a plan similar to one suggested by the Korea Development Institute in February last year. He dismissed the recent pension amendment as a “fake reform” and pledged a version that would be "fairer" for the youth.

Under Lee’s plan, the “new” pension would shift from the current defined benefit model to a defined contribution model, where individuals receive benefits proportional to what they paid in. He also supports the introduction of AAMs.

Lawmakers pass a bill for pension reform during a plenary session at the National Assembly in western Seoul on March 20. [NEWS1]

How are these policies being received?

Last Friday, civic group Public Pension for All held a press conference to evaluate each candidate’s pension pledges. The group criticized Lee Jae-myung’s policy for lacking detail, called Kim’s proposal overly skewed toward younger generations and regarded Lee Jun-seok’s framing of public pensions as if they were private insurance.

The group stressed that the government must first figure out how it will cover the system’s long-term financial shortfall, estimated at 1,700 trillion won ($1.2 trillion) in unfunded liabilities, before considering structural overhauls such as splitting the pension system.

Health and Welfare Minister Cho Kyoo-hong, far right, and officials attend a special parliamentary committee meeting for pension reform at the National Assembly in Yeouido, western Seoul, on April 30. [YONHAP]

Prof. Park Sang-in of Seoul National University’s Graduate School of Public Administration also weighed in during an interview with local broadcaster JTBC on May 18, saying that Lee of the Reform Party is the only candidate offering a specific pension reform proposal.

“Even if we separate the new and existing pension schemes, injecting public funds into the old system will still be inevitable,” Park pointed out.

He added, “We need to assess whether these proposals truly benefit younger generations by comparing them with alternative approaches that aim to secure income and ensure fiscal stability through early public investment.”

Prof. Kim Yong-ha of the IT Finance Management Department at Soonchunhyang University, a pension expert, criticized Reform Party candidate Lee’s proposal to split the current pension system into old and new schemes as “unrealistic."

“The policy is said to benefit the younger generation, but in fact, it does the opposite,” Kim told the Korea JoongAng Daily, pointing out that the proposed system sets the return ratio at 1, meaning individuals would receive only the amount they contributed, without any additional benefit.

Lamwakers from the liberal Democratic Party, conservative People Power Party and minor Reform Party, in their 30s and 40s, hold a press conference to oppose the latest pension reform at the National Assembly in Yeouido, western Seoul, on March 23. [YONHAP]

He emphasized that providing pension benefits is a fundamental responsibility of the state.

“Pension funds are accumulated in advance so that the government can distribute benefits efficiently,” he said, adding that concerns about the fund being depleted are overstated.

Regrading the adoption of AAMs, Kim said such measures should be a last resort.

“Countries that adopt these mechanisms typically do so after raising contribution rates to the highest possible level,” he said, adding that while the latest round of pension reform may still fall short, it is moving in the right direction.

BY CHO JUNG-WOO [[email protected]]