[Maeil Business Economist] Splitting the National Pension into Three (March 11, 2026)

(This column presents a reform proposal that closely parallels the position the Pension Future Forum has consistently advocated.)

In order to bring the benefit-to-contribution ratio of the public pension close to 1-to-1 for all generations, the author wishes to propose different pension reform approaches tailored to the circumstances facing each generational cohort.

First, for adolescents and future generations who have not yet entered the public pension system, a "New Pension" would be introduced in which retirement benefits are, on average, proportional to the pension contributions each individual has paid in.

Naturally, the benefit-to-contribution ratio for future generations covered under the New Pension would be approximately 1-to-1. For the current working-age generation already paying public pension contributions, it is also necessary to bring the benefit-to-contribution ratio close to 1-to-1.

To this end, notional individual accounts could be established and utilized within the existing public pension system.

Specifically, the contributions paid by these individuals up to the point of pension reform would be credited to such accounts together with an appropriate rate of interest, and the contributions paid after the reform would similarly be accumulated in those accounts.

If pension benefits are then set appropriately in accordance with the accumulated contributions, the benefit-to-contribution ratio for the working-age generation already participating in the public pension system can likewise be brought to approximately 1-to-1.

Finally, the pension benefits paid to the current retiree generation would be financed through the accumulated public pension fund and general government revenues.

Such a fiscal burden remains manageable for the Korean economy at present.

This is because the National Pension has a relatively short history, resulting in a comparatively small number of beneficiaries, while the working-age population available to support them remains sizable.

Moreover, this fiscal burden will gradually diminish along with the current retiree population.

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