On the 29th, Ahn Cheol-soo, chairman of the Presidential Transition Committee, announced, “We are promoting the establishment of a public pension reform committee to discuss the overall pension system and promote structural pension reform.” The transition committee will stop at reaffirming its will to promote pension reform, and detailed plans such as adjustment of insurance premium rates and income replacement rates will be decided by the newly established committee. Despite the imminent launch of the new government, it is difficult to avoid criticism in that it has failed to provide guidelines and timetables that are more advanced than the pension reform promises made by President-elect Yoon Seok-yeol.
As Chairman Ahn said, “If you are born after 1990, you have no money to pay in old age”, the national pension will run out around 2055 when people born in 1990 turn 65. If left unchecked, the ‘promise between generations’, the basic principle of the pension system, will be broken and the old generation will become a system that exploits future generations. As the Moon Jae-in administration has given up, the insurance premium rate to be borne by workers in 2050 is expected to rise from 20.8% to 25.5%. This means that the working generation has to pay a quarter of their monthly salary to the national pension for retirees.
Other pensions are also in serious condition. Civil servants and military pensions, which started running deficits in 2001 and 1973, respectively, had to make up for the deficit with taxes last year by 3.24 trillion won and 1.641 trillion won, respectively. Due to the increase of 129,000 civil servants by the current government, the national pension provision debt (converted to the present value of the pension to be paid later) also increased by 400 trillion won. Some point out that these pensions should be integrated with the National Pension to achieve equity in order to stop the financial support of pouring water into the bottom of the poison.
Raising the basic pension, a presidential campaign promise, makes the situation even more difficult. The transition committee said it would raise the basic pension paid to 70% of seniors 65 and older from 300,000 won a month to 400,000 won in stages. If the basic pension is paid according to the new standard, it will cost 49 trillion won in 2030 and 160 trillion won in 2050. It is difficult to handle without restructuring in conjunction with other pensions.
Every time pension reform is delayed due to the world’s fastest low birth rate and aging population, the burden on future generations is increasing like a snowball. In a TV debate with the presidential candidates, President-elect Yoon said, “The pension reform cannot be avoided, and it is not an option.” It is difficult to succeed if you do not speed up with a firm determination to make a decision within this year.
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