Korea: National Assembly to overhal pension system
As disbelief in the effectiveness of the nationalpension system mounts, the National Assembly’s Health and WelfareCommittee passed a set of bills Thursday to overhaul the nation’scontroversial pension system.
According to the reform bill, national pensionfees will be increased and the pension grant rate will be lowered,assuming that the “basic old-age pension system” is to be introduced.
The basic old-age pension is aimed at benefitingupwards of 60 percent of the population aged 65 and older, by givingout 70,000 won to 100,000 won per month to those living below thepoverty line and 50,000 to others.
The reform bills call for reducingpost-retirement payments to 50 percent of monthly salary from thecurrent 60 percent by 2008 and raising subscriber contributions from 9percent of earnings to 12.9 percent, by 2018.
The Ministry of Health and Welfare has estimatedthat additional tax revenues of about 19.1 trillion won will be neededby 2030 to carry out the basic old-age pension system. But some say thereform will place too much of a burden on the public.
“The need to reform the national pension systemwas discussed because the excessively high national pension grant ratewas likely to cause national pension funds to run out, which couldburden our descendants with larger taxes,” said an official from theFederation of Korean Trade Unions, one of the nation’s two flagshiplabor unions.
“In this sense, the recently invented basicold-age pension system is unlikely to improve the overall system. Ifthe basic old-age pension system is carried out without furtherdeliberation, the national pension system would soon face troubleagain,” the official said.
The pension reforms have been stalled for three years because of disagreement among political parties.