(Column 3 That Provided the Basis for Introducing the Basic Pension. OhmyNews, November 6, 2005) Professor Kim Yeon-myeong (Posted September 8, 2026)

The Logic of "Pay More, Receive Less" Will Not Solve It

(As of the second half of 2026,

the most contested issue

in pension reform is

the introduction of the Basic Pension,

and what set it in motion was the

November 6, 2005

column by Professor Kim Yeon-myeong

in OhmyNews.)

No one argues that the National Pension should simply be maintained as it is now.

The problem is a difference of understanding about why reform must be carried out and where the direction of reform should be set. The problems with the mainstream discourse — the government's plan among them — which holds that reform is needed for the fiscal stabilization of the National Pension have already been raised in many quarters, and there would seem to be no need to repeat them.

On several points it is necessary to raise more fundamental questions about the current pension reform debate.

The Burden of Supporting Older People: Not Extortion but a Historical Debt

The most important argument advanced by those calling for reform of the National Pension is that, for the sake of the National Pension's fiscal stabilization, people should pay more in contributions and receive less in pension benefits. The fiscal stabilization spoken of here is fiscal stabilization in the actuarial sense. That is, because the pension amounts drawn exceed the contributions paid, the fund is depleted in the late 2040s, and the proposal is therefore to "extend" the point of fund depletion.

It is because of this plausible-looking logic that the direction of National Pension reform was set wrongly from the very beginning. At the same time, this logic is an extremely simplistic view, one that fails to see in the round the several serious side effects that reform would bring.

The true meaning of fiscal stabilization in a public pension lies not in a balance between contributions and benefits in the actuarial sense, but in whether the national economy can bear the total scale of National Pension expenditure in the years ahead. If actuarial fiscal stabilization were the purpose of reform, it would be logically sound to carry out a private-insurance-style reform in which one draws out only as much as one has paid in.

According to the government's own official report, even if pensions are not cut and the current 9% contribution rate is maintained, total National Pension expenditure in 2050 would amount to only about 7% of GDP. In the early 2000s, pension expenditure in the OECD countries stood at around 10% of GDP on average.

A full 44 years from now the scale of National Pension expenditure will still fall short of even the current average of the OECD countries, so why is it claimed that the National Pension is in a state of fiscal instability? Once the fund is depleted, there is no other way than to pay pensions by raising contributions and drawing on taxation, and the advanced countries have all done precisely that.


Paying More and Receiving Less Will Not Do

Easing the contribution burden on future generations is likewise an important ground for the pension reform that would have people pay more and receive less. But this logic too carries no persuasive force once one thinks about it from even a slightly different angle.

Most people now in their thirties to fifties are setting aside part of their monthly pay to cover their parents' living costs while at the same time paying National Pension contributions in preparation for their own old age. This is what is called a "dual burden."

But the generations not yet born and those now in their teens and younger will not have to pay the cost of supporting their parents on the scale that the '30–50 generation' paid to support older people, because a substantial share of the generation now in their thirties to fifties will receive the National Pension. In other words, because future generations face no "dual burden" dilemma, the amount they spend on the cost of supporting older people is, in absolute terms, smaller than what the present generation spends.

If one considers the dual-burden problem that the present economically active population is living through, it is only natural that contributions should be raised for future generations, and this is not a matter of "extorting" from future generations but a historical debt for the support of older people that future generations ought rightly to bear.

Reform of the "pay more, receive less" kind does not achieve fairness between the generations in the support of older people; it is an unfair reform that forces an excessive burden onto the present generation. Of course, if the total cost of supporting older people that future generations will have to bear were so large as to be unbearable, the question would be a different one. But as noted above, there is no evidence that the total cost of supporting older people over the coming decades will be so large as to be unbearable.

If pensions are cut for the sake of fiscal stabilization, there is a strong likelihood that the fundamental purpose of the public pension will be damaged. The essential purpose of a pension lies in old-age income security.

Of course, depending on the pension scheme, the purpose may be a minimum level of income security, or it may be maintaining the standard of living one had before retirement. But if the pension amount is cut to 50%, or even to 40%, it is certain that most older people will receive a pension that falls short of even the minimum cost of living.

If a pension cannot prevent old-age poverty at even the most basic level, what use is it, however stable the pension's finances may become? If a reform damages the pension's own proper purpose of preventing old-age poverty, no pension reform whatsoever can be justified.

The Shock When the Pension Fund Is Liquidated Is Hard Even to Imagine

Another weakness of the government's amendment bill is that it sets the priorities for improving the system wrongly.

There is no room for doubt that the massive coverage gaps in the pension and the excessive accumulation of the pension fund are essential reform tasks that come, in point of timing, far ahead of fund depletion. What is fatal above all is the complete absence of any awareness of the problem of what an appropriate scale of pension fund accumulation would be. If pensions are cut as the government's plan proposes, the total amount of pension reserves is estimated to exceed 80% of GDP.

How the government is to manage this enormous sum as a single fund, and, still more, what sort of economic shock would appear if the astronomical sum tied up in stocks, bonds, and real estate had to be liquidated into cash in order to pay pensions, are hard even to imagine.

Thought about how to link fund investment organically to economic and industrial policy so as to raise the economy's productive potential is likewise insufficient. If the scale of the National Pension Fund's accumulated reserves must be lowered sharply, pension reform has to be approached in an entirely new way. The one-dimensional logic of paying more and receiving less cannot deliver a fundamental approach.

▲Kim Yeon-myeong

The Basic Pension system can become an old-age safety net that every member of society can accept, in a modern society where the uncertainties of life, such as job insecurity, are increasing.

The problem is the source of funding. If it is difficult to cover this from general taxation, part of the pension fund will have to be used. If the essence of a public pension scheme is understood as distributing to the older generation part of the wealth produced by the economically active population, there is nothing logically strange about using part of the present reserves as a funding source for the Basic Pension.

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