ed Overhaul of pensions

Parties must pass bipartisan reform bill by year’s end

The ruling Saenuri Party on Monday outlined a plan to overhaul the pension system for government employees, which envisioned implementing measures for better fiscal soundness than one proposed earlier this month by the Ministry of Security and Public Administration.

The party’s plan calls for adopting an income redistribution scheme to narrow the gap in pension payouts for high- and lower-ranking officials in what appears to be a move to placate unionized civil servants.

The age at which retired workers would be eligible to receive public pensions will be raised to 65 by 2031 gradually from the present 60. Civil servants’ monthly contributions to the pension system would also be raised by 3 percent to 10 percent of their incomes by 2018.

Under the governing party’s plan, the average government employee must boost his or her total pension contributions by 17 percent as compared to now, and the total sum of payouts will be cut by 15 percent. To help make up for their losses in pension payouts from the implementation of the new pension system, the government is due to pay retiring officials allowances equivalent to severance pay in the private sector.

The Saenuri Party said that such pension reforms would enable the government to save 47.8 trillion won from 2016 through 2027 because anticipated subsidies needed to cover the deficit in the civil servant pension system would fall to 46.1 trillion won under the new formula, compared with 93.9 trillion won at present. Even so, the government’s huge fiscal burden will remain similar, considering that a total of 834 trillion won in taxpayer’s money should be drawn out to cover the pension deficit through 2080.

Previous governments pushed for pension reform, but to no avail, in the face of tough resistance. Given this, the debt-ridden public pension system must this time be overhauled without fail.

But this is easier said than done. Stakeholders in this matter number nearly 4 million ― 340,000 existing pensioners, more than 1 million incumbent civil servants and their families. Systematic and strong resistance might be natural, given that the proposed reforms mean depriving people with vested interests of their welfare benefits. In fact, a labor union representing government officials rejected the plan and threatened to hold a massive protest rally in Yeouido Park, Seoul, on Saturday.

The main opposition New Politics Alliance for Democracy (NPAD) acknowledged the need to overhaul the current system but lashed out at the ruling party’s plan, saying that it still lacks consideration for low-ranking officials. But reform is never somebody else’s business, taking into account that the liberal party should draw out 6 trillion won from the national coffers every year without an overhaul, if it gains power during the 2017 presidential election.

Now there are calls to reach a social consensus on the public pension issue through consultations with civil servants. But we wonder if such a formula will work, if past experiences are any guide.

The time is long overdue for the NPAD to make public its own pension reform plan. The ruling and opposition parties should have in-depth negotiations based on their own schemes, and pass a bipartisan bill by the end of the year.