Pension Reform — Let's Start by Disclosing the Data
[Kookmin Ilbo · Op-Ed · February 15, 2022]
Yun Suk-myung, Research Fellow at the Korea Institute for Health and Social Affairs (KIHASA)
In the presidential candidates' TV debate on the 3rd, there was a proposal from candidate Ahn Cheol-soo of the People's Party to agree on pension reform. Perhaps because it was a sudden proposal, all participants — candidate Lee Jae-myung of the Democratic Party of Korea, candidate Yoon Suk-yeol of the People Power Party, and candidate Sim Sang-jung of the Justice Party — agreed to the reform. The agreement on pension reform among presidential candidates is likely to remain a significant event in our political history. Many view it as the greatest achievement of the first debate. However, something feels unsettling. This is because in several past overhauls of the pension system, especially the overhaul of the Government Employees Pension, reform was not properly implemented due to all sorts of tricks that even experts could not understand. In other words, deterioration was disguised as reform.
As the benefit rate of the Government Employees Pension was raised nearly twofold compared to when it was introduced in 1960, fiscal instability became inevitable. While claiming to fix the system, it was stated that the state would take responsibility for future pension deficits. A state guarantee of benefit payment provision was introduced, which is difficult to find examples of worldwide. The Government Employees Pension, designed to be received from age 60 at a time when life expectancy was 52, was changed only two years after its introduction so that it could be received immediately upon retirement with 20 years of contributions, and the benefit rate was doubled. Then, the problems that inevitably arose were simply passed on to the state.
A system introduced when life expectancy was 52 would be difficult to sustain in an era where life expectancy is 80, even if left unchanged. This is because the period for receiving benefits increases by 30 years. Despite such a situation being clearly predictable, it was turned into a patchwork system that even most experts could not understand in the name of reform. The 2009 overhaul of the Government Employees Pension is a representative example. Since I cannot list everything, let me give one example. Before 2010, the income applicable to the pension was the 'monthly remuneration.' Only the base salary, excluding allowances that make up a large portion of civil servants' pay, was the standard income for pension payments. At that time, it was at the level of 65% of the total pay that civil servants actually received.
As various allowances were included in the income applicable to the pension due to the 2009 overhaul, the standard income for calculating pensions increased by 35 percentage points, or 54% in ratio. Even if the benefit rate is slightly reduced, if the income used to calculate the pension increases significantly, the pension amount naturally becomes larger. Despite making a great show of participating in a painful reform, the pension amounts actually increased. 56% of active civil servants are set to receive higher pension amounts. A provision was slipped in without anyone knowing. This content came to light during a National Assembly public hearing in 2015. It happened when Representative Kim Hyun-sook of the Saenuri Party, following up on the issue I had raised, asked the Vice Minister of Personnel Management, who was present, whether it was true. In the public hearing that resumed after a recess, the answer was "Yes."
With only slight differences, the 2015 overhaul of the Government Employees Pension also hid similar tricks. Claims emerged that new civil servants received fewer pension benefits than the insured of the National Pension due to the 2015 overhaul, and people calling themselves experts accepted this. Consequently, the majority of civil servants believe these claims to be true. If it had been a proper overhaul, why would national liabilities have increased by more than 100 trillion won in 2020 alone due to the Government Employees Pension and Military Pension, which involve about 2 million people (4% of the total population), including contributors and beneficiaries? How could a president, who must oversee many things, properly know about such matters?
The Government Employees Pension financial projection reports, which had been disclosed until now, are now being kept secret as if it were natural. The devil is in the details. This is precisely why the agreement on pension reform among presidential candidates feels unsettling. It would be impossible for presidential candidates to agree immediately on a concrete plan for how to reform pensions. However, regardless of who becomes president, if they agree to disclose all data related to pensions without omission or addition, there could be no more valuable achievement than that. I look forward to the candidates reaching such an agreement in the next TV debate.
Source: Kookmin Ilbo (original article)
