"Pension Reform That Pays More Is Possible Without Changing the Income Replacement Rate" [Issue Interview] (June 2024)

Political discord over pension reform continues unabated. The Democratic Party of Korea announced that it would accept the bipartisan compromise proposal (a contribution rate of 13% and an income replacement rate of 44%), while the People Power Party moved to slow the process, insisting that structural reform of the pension system is necessary.

In this context, a proposal by the Korea Development Institute (KDI) to bifurcate the National Pension into a new pension and an old pension has come under discussion.

Yoon Seok-myeong, Honorary Research Fellow at the Korea Institute for Health and Social Affairs (KIHASA), stated in an interview with Asia Economy on the 4th that "both proposals have fatal problems," characterizing them as "passing astronomical debt on to future generations or shifting the burden of pension reform."

Regarding the bipartisan compromise proposal in particular, he criticized it, saying, "The very point of reform is that there are shortcomings that need to be addressed—yet rather than reducing the debt burden, what we have is a measure that increases debt under the banner of reform." He added that "even a 0.1 percentage point increase in the income replacement rate makes this not a reform but a deterioration in substance."

He explained that "instead, fiscal stability can be achieved by supporting vulnerable groups through tax-funded measures such as the Basic Pension, and by reducing monthly and annual pension benefit payments in line with increases in life expectancy."

https://cm.asiae.co.kr/article/2024061013434828457