The ruling and opposition parties held a policy forum on the 28th under the theme of "structural reform for a sustainable and fair pension system." It is welcome news that the two sides have found common ground on restructuring the National Pension Service after more than a year and a half of stalemate. Rep. Yoon Young-seok of the People Power Party, who chairs the National Assembly's special committee on pension reform, said he would "fulfill his responsibility in building a sustainable and fair pension system." Health and Welfare Minister Jeong Eun-kyeong also pledged to actively support the discussions on structural reform. In March last year, the National Assembly passed a parametric reform setting the contribution rate at 13% and the income replacement rate at 43%, yet public distrust over the pension system's sustainability persists. What the country needed was a scheme requiring people to pay more and receive less, but the parties instead patched together a half-measure under which participants pay more and receive more.
The parties' discussion of structural reform is encouraging, but much remains to be done. The government has been reluctant to pursue structural reform, worried about a backlash from stakeholders after a stock market rally sharply increased the pension fund's reserves. The National Pension Service earned 401 trillion won in investment returns in the first six months of this year. The projected date of fund depletion is also expected to be pushed back significantly from the estimate made at the time of last year's parametric reform. At a news conference in June marking his first year in office, President Lee Jae-myung said in effect that it was fortunate the country would not have to discuss structural reform of the pension system for a considerable period. But that amounts to excessive optimism, given that the semiconductor boom driving the stock rally could end in two or three years.
South Korea officially became a super-aged society last year, when the share of the population aged 65 and over exceeded 20%. The number of pension subscribers will decline while life expectancy continues to rise. Without fundamental surgery, such as introducing an automatic adjustment mechanism that links benefit levels to demographic and economic conditions, the burden on future generations is bound to grow. Securing retirement income is important, but improving fiscal sustainability and ensuring fairness across generations are tasks that can no longer be postponed. Now, with high returns providing some breathing room, is the ideal moment to accelerate follow-up reform of the National Pension Service. The country should swiftly build a multilayered income security system that links the National Pension scheme with basic, private and retirement pensions, easing the burden on younger generations while firmly establishing a safety net for retirement income.
