Gov't mulls raising NPS premiums
By Na Jeong-ju
The government is seeking to raise monthly premiums paid by salaried workers and the self-employed to the National Pension Service (NPS) in a bid to broaden its pension reserve.
A government committee established to discuss how to overhaul the state pension system has recently agreed to recommend raising monthly premiums.
Based on its proposal, the government will finalize a reform plan and submit it to the National Assembly in October for revision of the country’s pension laws, sources said Tuesday.
If the plan succeeds, it will be the first increase of premiums since 1998. Under the pension law implemented in 1988, the ratio of premiums to income had risen from 3 percent to 9 percent until 1998.
The plan is expected to trigger massive protests from subscribers of the NPS. They are currently paying 9 percent of their income to the NPS, but committee officials say the rate should be increased to 13 or 14 percent in the long term.
The committee also proposed raising the age people start receiving pension benefits from the current 61 to 67.
These ideas are based on a bleak prospect that the pension reserve could be depleted after 2053 due to the aging demographic and shrinking working-age population.
That means future generations will have to shoulder a tremendous burden to provide pensions to the older generation, if the current system persists.
To address this problem, the government has cut pension benefits while planning to increase the age of beneficiaries to 65 by 2033.
The harsh reality for future generations is that they will pay more, but receive fewer benefits than their parents or grandparents.
NPS subscribers have complained that the government is trying to overhaul only the NPS, while turning deaf ears to public calls to reform other money-losing state pension programs.
The government is currently running separate pension programs for public servants, career soldiers and private school teachers. Like ordinary waged workers, they pay a certain amount of premiums in proportion to their monthly income and receive a pension after they retire.
However, the pension reserves for career soldiers and public servants were depleted in 1977 and 2001, respectively. Since then, the government has used a huge amount of taxpayers’ money to pay pensions to them.
That’s simply because the government paid out too much to recipients, while collecting insufficient funds. Analysts forecast the pension for private school teachers will also be depleted by 2033.
This year alone, the government plans to spend more than 3 trillion won ($2.77 billion) of taxpayers’ money to pay pensions to retired public servants and soldiers. Many ordinary waged workers feel it is absurd.
Some members of the government committee for pension reform reportedly opposed the ideas of raising pension premiums, citing these reasons.
“They claimed the government should plug the loopholes in the pension programs for public servants, soldiers and teachers first before reforming the pension for salaried workers and the self-employed,” a government source said on condition of anonymity.
“It’s early to say whether the government will be able to increase pension premiums because there will be huge public protests. That poses a dilemma for the government, which must deal with the issue before it’s too late.”
Lee Sang-woo, a researcher from the Korea Insurance Research Institute, proposed the pensions for soldiers, public servants and teachers should be combined into the NPS.
“Ordinary citizens feel disadvantaged because pensions for public servants, soldiers and teachers are covered by taxpayers’ money. That actually means that ordinary people are paying their pension,” Lee said. “They are not ‘special’ citizens. They should be treated equally like other citizens.”