Disclose the Cumulative Deficit After the National Pension Fund's Depletion, First (2024-03-13)

(National Assembly Public Deliberation Committee Pension Reform Plan Is a ‘Deterioration’

Advisory Group Skewed with Proponents of Strengthening Benefit Adequacy

Concern That a Pension ‘Gray Rhino’ Crisis Is Emerging

Disclosing the Unfunded Liability and Cumulative Deficit Is Common Sense)

Criticism has emerged that the National Pension reform plan put forward by the National Assembly Special Committee on Pension Reform's Public Deliberation Committee through its agenda deliberation panel workshop is not a ‘reform’ but a ‘deterioration.’

The Public Deliberation Committee's reform plan consists of Option 1, which raises the contribution rate from the current 9% to 13% while also raising the income replacement rate from 40% to 50%, and Option 2, which raises only the contribution rate to 12% while keeping the income replacement rate unchanged. Even under either option, the fund's depletion point would be pushed back only seven years and eight years, respectively, from the original 2055. This is a further retreat compared to the ‘15-point contribution rate increase + maintain the income replacement rate’ option that the Pension Committee's private advisory committee had prominently floated last November, which could have pushed back the depletion point by 16 years.

There is no shortage of talk about this backward-stepping reform plan. It is said that the Public Deliberation Committee's expert advisory group (11 members) was disproportionately filled with social welfare scholars who argue for ‘strengthening benefit adequacy.’ By contrast, relatively few fiscal scholars who emphasize ‘fiscal stability’ were included. There are also criticisms that the agenda deliberation panel included many people from labor and civic groups who favor raising the income replacement rate. Going forward, the plan is to push for legislation before May 29, when the term of the 21st National Assembly ends, following four public debates by the 500-member citizen representative group, but it is doubtful whether this ‘tilted public forum’ can play its proper role.

Regardless of which of the two options is adopted, the Public Deliberation Committee seems to be presenting, as a major reform, the mere fact that the contribution rate would be raised and the fund's depletion point pushed back a few years — the first such change in 27 years since 1998 (based on when it would take effect, starting next year). But how does it propose to cope with the cumulative deficit that will keep snowballing even after the fund is depleted? 

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