(Asia Today Report, May 12, 2015) If the Income Replacement Rate Is Raised to 50%, Will the Contribution Rate Double? — Kim Yeon-myeong: "Is the Government Running a Pension Just to Pile Up a Fund?" (Posted September 4, 2026)
(Would the experts who appear in this article
still be able to make the same statements
today!)
National Pension Contribution Rate: Government's "Up 9 Percentage Points" vs. New Politics Democratic Union's "About 1 Percentage Point"
Experts: "Is the Government's Goal to Undermine Trust in the National Pension?"
On the 12th, an intensive debate was held at the National Assembly on the "50% income replacement rate," the issue thrust into the spotlight by the presidential office's announcement of a "1,702 trillion won tax bomb."
At the policy debate that day, co-hosted by the New Politics Democratic Union's Policy Committee and the National Assembly Economic and Social Policy Forum, the lead presentation was given by Kim Yeon-myeong, Professor of Social Welfare at Chung-Ang University, who had served as co-chair of the working group on Government Employees Pension reform.
In a press release the previous day, Professor Kim had already dismissed the presidential office's announcement of a "1,702 trillion won tax bomb," calling it "nothing short of malicious and not worth a moment's consideration."
That day, with evident determination, he rebutted point by point the Ministry of Health and Welfare's claim that raising the income replacement rate to 50% would require lifting the contribution rate from the current 9% to the 16–18% range. Raising the National Pension's income replacement rate from 40% to 50% and doubling contributions from their current level, he argued, are plainly two entirely different things.
Professor Kim explained that, according to data supplied by the Ministry of Health and Welfare, if fund depletion is fixed at 2060 and the income replacement rate is raised to 50%, the contribution rate rises by 1.01 percentage points from the current 9% to 10.01%.
As for fixing fund depletion at 2060, he said his reasoning was that the Ministry had itself stated that, with the contribution rate held at 9% and the nominal income replacement rate at 40%, the National Pension Fund would fall into deficit in 2044 and be depleted in 2060, and that only by calculating on that same basis could social confusion be reduced.
As for the figure of a 50% income replacement rate, he said it was the number that had drawn the broadest support among experts at the time of the 2007 National Pension reform (a contribution rate of 12.9% with an income replacement rate of 50%). He stressed in particular that this figure had been discussed again and again in the Grand Compromise Body's Subcommittee on Old-Age Income Security.
The government, however, has since extended the projected date of fund depletion and now works from a 2083 baseline. On that basis, it has said, raising the income replacement rate to 50% would require lifting the contribution rate to the 16–18% range from 2015 onward.
On this point Professor Kim countered: "(If the contribution rate is doubled from 2015) by 2083 the fund will have piled up to a staggering 140% of GDP. That is the government's own official data." He added: "An 18% contribution rate is a contribution rate for stockpiling a fund. The contributions needed for the additional pension spending generated by raising the income replacement rate to 50% will never climb above 12%, however generously one counts."
"What reason is there to stockpile the National Pension Fund until it reaches 140%?" he asked. "The pension was created to pay older people; it is not a fund to be piled up." He continued: "The fund is all in equities, bonds and real estate, so there is a liquidity problem as well." Setting the appropriate size of the fund, he added, is a question that requires social consensus.
Attorney Lee Chan-jin, a discussant at the debate and Chair of the Social Welfare Committee at People’s Solidarity for Participatory Democracy, criticized the government. "A deficit between revenues and expenditures emerges around 2043, and the reserve fund was kept to a minimum precisely to cushion that moment," he said. "Contributions were scheduled to be raised in stages, and now the government is talking about a fully funded system. This cute little idea amounts to turning the present scheme into a financial product."
A professor of social welfare at Dankook University said: "It is troubling that the government keeps pointlessly generating this talk of intergenerational burden and theft around the National Pension, as though its intent were to undermine trust in the scheme." The professor then left the door open, adding: "Income security through the National Pension is of course necessary, but whether to raise the rate uniformly to 50% or to go about it in some other way is something I think needs a little more discussion."
Representative Kim Yong-ik, a member of the National Assembly's Health and Welfare Committee and of the Special Committee on Government Employees Pension Reform, criticized the claim: "The argument is that covering the deficit out of taxes for the 20 years from depletion in 2060 through 2080 would cost 130 billion won, and that raising the income replacement rate to 50% would cost 1,702 trillion won—and then, with everything before and after cut away, they call it a 1,702 trillion won tax bomb. That is the spreading of false information." He went on: "Those numbers are true, but the interpretation is a complete misunderstanding, if not the height of conspiracy."
Representative Kim added that it was "truly appalling that the presidential office and the Ministry of Health and Welfare should mislead the public in this way," and that "at the very least, a government institution has to have the basic neutrality to tell the truth if it is to perform its role as government."
Source: Asia Today (https://www.asiatoday.co.kr)
