[MK Chunchu Column] The Canadian Pension Story (January 23, 2026)

This column compares the operational model of Canada's Canada Pension Plan (CPP) with Korea's National Pension; however, as certain key aspects of the matter are not adequately presented, the Pension Future Forum wishes to set out its position.

(Position of the Pension Future Forum)

The column by Jang Jae-hyeok, Executive Director for Planning at the National Pension Service (NPS), fails to accurately describe several important aspects of the Canadian pension system.

This is because, at the time the contribution rate was raised to 9.9% in 1999, the income replacement rate of the Canadian pension was approximately 24%.

This is precisely why the unfunded pension liability—which the Pension Future Forum places particular emphasis on—does not pose a problem under the Canadian pension system.

Until the most recent pension reform, even 150 years into the future, this is also the reason the system had sufficient funds to pay out pension benefits. (It is reported that there were considerable disagreements among Canadian government ministries over the content of the recent CPP reform. This is because the reform moved the pension system in a direction that could introduce greater financial instability than before.)

Above all, the Canadian pension has adopted the most robust form of automatic adjustment mechanism in the world.

(This stands in stark contrast to Korea's own experience, where—despite strong demands from the People Power Party, which was then the ruling party, at the time of the National Pension Act amendment passed on March 20, 2025—such a mechanism ultimately could not be adopted.)

While such a scenario is inconceivable, if a source of financial instability were to arise in the Canadian pension system and the political sphere were to engage in the kind of prolonged inaction in formulating fiscal stabilization measures seen in Korea's political arena,

the law mandates the compulsory introduction of an automatic adjustment mechanism capable of achieving fiscal stability over an extended long-term period. (This is explicitly stipulated in the legislation.)

During the Moon Jae-in administration, Kim Sung-joo, who was then President of the National Pension Service (NPS), similarly failed to provide an accurate account of the Canadian pension's operational status, as in the content of this column.

And now, Executive Director Jang Jae-hyeok is once again failing to properly explain the operational status of the Canadian pension to the Korean public.

(The following is the main content of the column by Jang Jae-hyeok, Executive Director for Planning at the National Pension Service, as set out in his column.)

Canada resembles Korea in several respects. The two countries are comparable in terms of population, GDP scale, and a manufacturing-based industrial structure, and the manner in which they operate their public pensions is similarly aligned, making Canada a perennial benchmarking reference for Korea. Canada's system generates annual investment returns that exceed pension contributions themselves, uses those returns to pay pension benefits, and reinvests the remaining surplus back into the reserve fund, thereby expanding the fund balance.

Canada carried out two rounds of pension reform, in 1997 and 2016, both of which were "contribute more, receive more" reforms. The impetus for reform traces back approximately 30 years to 1995, when the Canadian government released a shocking fiscal report projecting that the public pension would be completely depleted around 2015—some 20 years into the future. Then-Finance Minister Paul Martin led the reform effort, proposing a phased increase in the pension contribution rate from a mere 5.6% to 9.9%, while simultaneously establishing the CPPI with substantially enhanced independence and professional expertise. Protests against the sharp contribution rate increase were mollified by a commitment to raise the pension payout rate (income replacement rate) in accordance with fund investment performance. What were the results?

(Excerpt omitted)

Korea is following a similar trajectory to Canada. Last March, Korea succeeded in a "contribute more, receive more" pension reform, which is expected to proceed in the sequence of contribution rate increase → generation of fund investment returns → expansion of reserve fund. This type of pension reform is most advantageous to the younger generation. It minimizes contribution rate increases while using increased investment returns to pay benefits to the older generation, with the remaining surplus passed on as an inheritance. In last March's reform, the income replacement rate was raised by 3 percentage points alongside the contribution rate increase (40% → 43%), and since this applies only to future contribution periods rather than to existing beneficiaries, younger cohorts are the primary beneficiaries. In addition, a mandatory state payment guarantee provision was newly established to allay concerns among the younger generation, and birth and military service credits were also dramatically improved.

The foremost challenge for Korea's National Pension going forward is to sustain long-term fund investment returns that are on par with those of Canada's CPPI. This is the key to ensuring the success of the "contribute more, receive more" pension reform. It is hoped that, some 20 years from now, the National Pension will be the most trusted and valued pension system in the eyes of the Korean public.

https://n.news.naver.com/article/009/0005626480?sid=110