Measures Necessary to Cover Minimum Living Costs
The governing Uri Party and the opposition Grand National Party (GNP) reached a tentative agreement on how to revise the National Pension Fund Law on Thursday, two weeks after their respective amendment bills failed to get approval from the National Assembly. The agreement is expected to help the nation take an initial step toward pension reform.
However, it is regrettable that the parties are apparently trying to take a step backward in their original reform proposals for the pension fund which is predicted to run out in 2047 amid a rapid growth of the elderly population. They come under criticism for making a compromise in the middle of the road in an apparent bid to appease voters, especially salaried workers, ahead of the December presidential election. Many are strongly against a ``pay more, get less’’ formula.
The Uri Party has agreed to accept a new proposal made by the GNP and the Democratic Labor Party which is designed to cut pension benefits gradually by 33 percent from 2009 till 2018 while maintaining the current level of subscribers’ contributions. This means that the governing party has compromised its previous plan to cut the benefits and raise the contributions at the same time to stabilize the pension fund, which might suffer from an 80 billion won loss each day without reform.
If the compromised bill is presented to parliament and gets approval, the pension fund is forecast to start recording a deficit in 2045 and dry out in 2061. That is, the proposal is only intended to postpone the fund’s bankruptcy by 16 years. Labor unions and civic groups have called for more revolutionary measures to ensure the fund’s financial soundness as well as to promote pensioners’ welfare.
Critics pointed out that it is only a stopgap measure to collect more contributions from workers and pay less benefits to them. They claimed that if pension benefits are cut by 33 percent, a worker earning a monthly wage of 3.6 million might get 570,000 won in pension benefits per month after they pay 9 percent of their income over the next 20 years or so. The sum is down from 810,000 won when the current pension scheme is maintained without any change.
It is almost impossible for anyone to lead a decent life with such a small amount of pension. In fact, most retirees are unable to live solely on their pensions even under the current scheme. However, the government and political parties have done little to provide an adequate amount in pension benefits to retirees even to cover their minimum living costs.
What’s more worrisome is that about 60 percent of pension fund subscribers are feared to get only piecemeal benefits that are far lower than the minimum living expense currently set at 430,000 won per month. Nineteen years have passed since South Korea introduced the National Pension Scheme to speed up its much-vowed efforts to build a welfare state. But now we have still a long way to go to realize the national goal.