A Solution to the Controversy Over the Spouse's Share of the National Pension

[Seoul Economic Daily · Op-Ed · June 17, 2012]

Yun Suk-myung, Research Fellow at the Korea Institute for Health and Social Affairs (KIHASA)

Among the systems operated by the state, there seems to be no system that has undergone as many twists and turns as the National Pension. An absurd example would be the 'Eight Great Secrets of the National Pension.' In 2004, a post stating that the National Pension was a problematic system that only resulted in losses one way or another was circulated via the internet, causing a huge stir. Due to this text of unknown origin, candlelight vigils opposing the National Pension were held, and some even went so far as to argue for the abolition of the National Pension. Looking back now, it was a ridiculous occurrence, but at the time, it was at the center of a fierce debate.

Dissatisfaction Persists Over Failure to Receive 80% of Survivor Pension Benefits

While most of the eight secrets were contents that misrepresented the facts, there was also a 'secret that was not a secret' that left policy authorities perplexed. The 'overlapping payment adjustment' system—which stipulates that if both spouses have been insured in the National Pension for 10 years or more and receive old-age pensions, but one spouse dies first, the survivor may choose to receive only one between their own old-age pension and the survivor pension—was heavily criticized. This system follows the general principle of social insurance, which prevents excessive benefits from being paid to a single person so that all citizens can evenly receive a minimum guarantee of livelihood. However, public backlash was very severe, and extreme expressions such as 'the government is swallowing the spouse's share of the pension' appeared on the internet.

As the situation became serious, the government amended the system so that an additional 20% of the survivor pension amount (40–60% of the spouse's old-age pension amount + dependents' pension) could be received in addition to one's own old-age pension. However, public dissatisfaction seems to persist. The argument is that since the history of the National Pension's introduction is short and both the pension contribution rate and the income replacement rate of the old-age pension are not high, even combining 100% of the old-age pension and survivor pension amounts is woefully insufficient for living expenses in old age, so why is only 20% of the survivor pension amount provided? Furthermore, if one spouse is a beneficiary of the Government Employees Pension, the Private School Teachers Pension, or the Military Pension, they do not suffer such disadvantages.

The government, which is responsible for operating the system, has considerable concerns. This is because the reality of our National Pension is that even with overlapping payment adjustments, beneficiaries take home more than the contributions they paid. The National Pension is a system created to respond jointly to social risks. Therefore, it is consistent with the operating principles of social insurance to view the spouse's pension eligibility as an asset of society as a whole rather than as a property right on the level of a personal pension. Many other countries also implement overlapping payment adjustments for public pensions.

Overlapping payment adjustment could become an obstacle to reducing coverage gaps, which are pointed out as the Achilles' heel of our National Pension. Currently, a significant number of citizens are not paying National Pension contributions, such as those excluded from coverage represented by full-time homemakers and exempted non-payers who have deferred contribution payments due to reasons such as unemployment. While the government encourages voluntary enrollment so that these individuals can receive the National Pension in old age, the current overlapping payment adjustment system conflicts with efforts to activate voluntary enrollment.

Adjust Based on Combined Old-Age and Survivor Pension Levels

Considering various circumstances, it seems desirable to reexamine the current National Pension overlapping payment adjustment system. There is a need to seek remedial measures considering the adequacy of pension benefits as well as the sentiment of our citizens, who have an exceptionally strong obsession with getting their money's worth. Specifically, it is necessary to consider transitioning from the current overlapping payment adjustment system—which limits payments to 'one's own old-age pension + 20% of the survivor pension amount'—to a method like that of Germany, where overlapping payments are adjusted only when 'one's own old-age pension + 100% of the survivor pension amount' exceeds a certain level. Coincidentally, this year marks the start of the National Pension Financial Estimation and System Improvement Committee, which reviews the overall National Pension system. While firmly upholding the basic principles of the National Pension as a social insurance system operated based on social solidarity, I look forward to discussions on system improvements that reflect Korean sentiments and the social environment.

Source: Seoul Economic Daily (original article)