Time to discuss overhaul plan from square one to cut deficit
The ruling and opposition parties failed to pass a pension reform bill for civil servants Wednesday, the last day of a National Assembly extraordinary session.
The foiled reform comes as a surprise because the two main parties signed a deal Sunday to overhaul the deficit-ridden pension program by increasing government workers' contributions while reducing their entitlement payments. But what's dumbfounding is the reason for the rupture ― parties wrangling over the national pension system that has nothing to do with the civil servant pension plan.
On Sunday, the parties agreed to honor a recommendation by the special committee on civil servant pension reform that the income replacement ratio for the national pension be raised to 50 percent from the current 40 percent. The income replacement ratio is retirement income expressed as a percentage of preretirement income.
But the public, especially younger people, and the government have condemned the tentative agreement, saying the change could require more than 1,600 trillion won over the next 70 years. It might be natural that the public reacts furiously to the parties' misleading populist schemes made without any concerns of how to raise the money.
As the passage of the pension reform bill foundered, the parliament also failed to approve other bills related to the people's livelihoods. All the commotion about the pension overhaul turned out to be much ado about nothing, while really pressing issues have remained unattended.
Yet it might be a relief that the reform bill was not approved at the legislature, given its many inherent problems. The initial agreement between the two main parties envisioned raising civil servants' contributions to 9 percent of their income from 7 percent at present, while reducing their entitlement payments gradually over the next two decades.
The agreement was evaluated to be insufficient because the daily pension deficit ― which is bolstered by taxpayer money ― will decrease from 8 billion won currently to 6 billion won next year, but the deficit will swell back to 10 billion a day in 2022.
The government's original overhaul scheme was bolder, asking incumbent officials to pay much more but receive far less. Over the long term, the plan proposed scrapping the civil servant pension system and integrating it into the national pension plan. But the parties, especially the governing Saenuri Party, retreated from their original goals, swayed by the civil servants' unions.
As things stand now, it's uncertain whether the Saenuri Party and the main opposition New Politics Alliance for Democracy (NPAD) can hammer out a compromise in the foreseeable future. It's possible that overhauling the pension scheme for civil servants might be over in the incumbent administration. But taxpayers won't tolerate this situation.
Now it's necessary to start the pension reform discussion from square one in order to reduce the pension deficit as much as possible. It's true the national pension system is not sufficient enough to guarantee people's retirement lives, but linking the two different pension plans at this juncture won't be realistic.
The ruling and opposition parties failed to pass a pension reform bill for civil servants Wednesday, the last day of a National Assembly extraordinary session.
The foiled reform comes as a surprise because the two main parties signed a deal Sunday to overhaul the deficit-ridden pension program by increasing government workers' contributions while reducing their entitlement payments. But what's dumbfounding is the reason for the rupture ― parties wrangling over the national pension system that has nothing to do with the civil servant pension plan.
On Sunday, the parties agreed to honor a recommendation by the special committee on civil servant pension reform that the income replacement ratio for the national pension be raised to 50 percent from the current 40 percent. The income replacement ratio is retirement income expressed as a percentage of preretirement income.
But the public, especially younger people, and the government have condemned the tentative agreement, saying the change could require more than 1,600 trillion won over the next 70 years. It might be natural that the public reacts furiously to the parties' misleading populist schemes made without any concerns of how to raise the money.
As the passage of the pension reform bill foundered, the parliament also failed to approve other bills related to the people's livelihoods. All the commotion about the pension overhaul turned out to be much ado about nothing, while really pressing issues have remained unattended.
Yet it might be a relief that the reform bill was not approved at the legislature, given its many inherent problems. The initial agreement between the two main parties envisioned raising civil servants' contributions to 9 percent of their income from 7 percent at present, while reducing their entitlement payments gradually over the next two decades.
The agreement was evaluated to be insufficient because the daily pension deficit ― which is bolstered by taxpayer money ― will decrease from 8 billion won currently to 6 billion won next year, but the deficit will swell back to 10 billion a day in 2022.
The government's original overhaul scheme was bolder, asking incumbent officials to pay much more but receive far less. Over the long term, the plan proposed scrapping the civil servant pension system and integrating it into the national pension plan. But the parties, especially the governing Saenuri Party, retreated from their original goals, swayed by the civil servants' unions.
As things stand now, it's uncertain whether the Saenuri Party and the main opposition New Politics Alliance for Democracy (NPAD) can hammer out a compromise in the foreseeable future. It's possible that overhauling the pension scheme for civil servants might be over in the incumbent administration. But taxpayers won't tolerate this situation.
Now it's necessary to start the pension reform discussion from square one in order to reduce the pension deficit as much as possible. It's true the national pension system is not sufficient enough to guarantee people's retirement lives, but linking the two different pension plans at this juncture won't be realistic.
