Questions raised over old-age pension

By Kim Rahn

In order to receive about 200,000 won per month in state pension benefit after the age of 65, you have to pay 150,000 won in insurance every month for 10 years. However, a policy proposed by Park Geun-hye’s campaign team during the presidential election would provide all pensioners aged 65 or over currently not covered by the state pension with 200,000 won per month.

Unsurprisingly, it’s a popular idea with most people because increasing numbers of people not earning a wage, such as homemakers and students, have been choosing not to make pension fund contributions with any spare money they might have.

Paying state pension contributions is mandatory for all wage-earning workers. Housewives, students or others not earning income can also subscribe voluntarily if they want to receive monthly pension in their old age.

The number of voluntary contributors was some 207,800 as of last December, with 3,063 people applying to the scheme per month on average last year. But only about 1,000 applied in January.

At a National Pension Service (NPS) call center, 70 voluntary contributors canceled their contracts in December, and this figure rose to 120 in January.

“The subscription rate has reduced recently. It seems that people are confused, weighing the benefits of the current national pension against the proposed one,” said a staffer of the NPS.

Currently, the old-age pension given to people aged 65 or over in the bottom 70 percent income bracket is about 97,000 won per month. But Park pledged to enable all the elderly to receive 200,000 won monthly — including those who currently don’t receive any state pension benefits and for policyholders whose benefit entitlement is below 200,000 won, the government will pay the shortfall.

“The voluntary contributors don’t pay a large amount in premiums to the national pension and thus won’t receive much benefit in return, probably less than 200,000 won. If, however, they can receive 200,000 won per month without making any contributions, it is obvious that they will not pay into the national pension fund,” said Yun Suk-myung, an official at the Korea Institute for Health and Social Affairs.

He said a more serious problem than a withdrawal by voluntary contributors to the national pension could be low-income workers or people running their own businesses, who are mandatory contributors, deciding to reduce their payments too.

“Shop owners, day laborers or golf caddies are registered as individual business operators. While they are mandatory subscribers, it is possible for them to falsely report their income to the authorities as being less than it actually is because that would enable them to pay less pension contribution. This seems very likely if the shortfall will be supplemented with the state-paid old age pension anyway,” he said.