The Private School Teachers Pension Requires Extraordinary Measures

[Hankook Ilbo · Opening the Morning · March 2, 2023]

Yun Suk-myung, Research Fellow at the Korea Institute for Health and Social Affairs (KIHASA) and former President of the Korean Pension Association

Pension reform committees are operating simultaneously in the executive branch and the National Assembly. The National Assembly Special Committee on Pension Reform, whose activity period was set until April of this year, sought to limit the scope of discussion from the beginning, considering its short duration. Under the perception that expanding the scope of discussion would broaden the front and make it difficult to achieve proper results, the majority opinion was to focus discussions on the National Pension and Basic Pension.

My view was different. This was because I believed that proper discussions on the National Pension and Basic Pension are difficult without addressing the Government Employees Pension, Military Pension, and Private School Teachers Pension, which have already entered an incurable stage. It was based on the judgment that no citizen would agree to first fix the National Pension, where fiscal instability will only become apparent in the future, while leaving aside schemes where fiscal instability has already begun in earnest.

The public is aware of the severity of the situation regarding the Government Employees Pension and Military Pension through media reports stating that their accrued pension liability reached 1,138 trillion won (2021). On the other hand, the Private School Teachers Pension, where the problem is most severe, has remained completely untouched by the storm. This is because it is known to be in better shape than the Government Employees Pension and Military Pension due to its reserves of 24 trillion won. In private settings, university professors say, "We are different from the Government Employees Pension and Military Pension because we have reserves." Even Seoul National University professors, who became contributors to the Private School Teachers Pension after incorporation, believe there are no problems with the future of the Private School Teachers Pension.

Above all, the Private School Teachers Pension is no longer a pension centered on teachers. As of 2021, among the 330,000 total contributors to the Private School Teachers Pension, staff contributors numbered 174,000, exceeding half. This phenomenon occurred after staff enrollment in national and public university hospitals was permitted in 2016. By 2040, among the total 290,000 contributors, there will be 153,000 hospital contributors and 137,000 faculty and staff contributors, transforming it into a staff pension—specifically, one centered on hospital staff. As National Pension contributors changed their eligibility to the Private School Teachers Pension, the Private School Teachers Pension has turned into a staff pension, specifically one centered on hospital staff.

Despite the fact that contributors from national and public hospitals account for the majority, by 2090, one active member of the Private School Teachers Pension must support 2.4 retirees (median assumption) or 3.4 retirees (low assumption). This is because the school-age population, which was 15.46 million in 2020, will decrease to 5.3 million by 2090. In the low assumption, which signifies a pessimistic situation, the school-age population decreases to 3.15 million. Even in this situation, no one is raising any issues because there are reserves of 24 trillion won.

Because the support structure of the Private School Teachers Pension is as such, a deficit between revenues and expenditures will occur in 2029, and fund depletion will occur by 2049. A deficit of 3.1 trillion won will occur in 2050, 4.8 trillion won in 2060, and in 2090 alone, a deficit of 11.9 trillion won (total revenues 5.9 trillion won, total expenditures 17.8 trillion won) will occur. Even though the outlook for the Private School Teachers Pension (2020 financial projection) is this bleak, there are 58 beneficiaries under the age of 40 and 2,771 beneficiaries under the age of 50. The average pension amount for beneficiaries under 45 is 1.63 million won, for those under 50 it is 2 million won, and for those under 56 it is 2.56 million won. Among numerous pension experts, not a single person is raising the severity of the problem. This is despite the fact that the unfunded pension liability of the Private School Teachers Pension is estimated to exceed 160 trillion won, at a conservative estimate. Unfunded liability refers to the shortfall among the pension amounts already promised to be paid.

In the executive branch, there is no longer even a dedicated division in charge of the Private School Teachers Pension. This happened after employees of the Private School Teachers Pension Service, who were National Pension contributors, self-converted into contributors to the Private School Teachers Pension. It is time for the executive branch and the National Assembly to step forward and prepare extraordinary measures. How can they ask citizens to cooperate with pension reform while leaving this situation neglected?

Source: Hankook Ilbo (original article)