Gov't to guarantee national pension payment

Health and Welfare Minister Park Neung-hoo announces the government's national pension reform plans at a press conference in the Government Complex in Seoul, Friday. / Yonhap

By Kim Hyun-bin

The government will take the ultimate responsibility for covering the national pension program, by guaranteeing a clause in the relevant law, the Ministry of Health and Welfare said on Friday.

The move is part of the government's plan to reform the state pension program, the fund for which is feared to be depleted by 2057 due to the low birthrate and sluggish economic growth.

Health Minister Park Neung-hoo said the ministry would incorporate a clause guaranteeing the National Pension Service's (NPS) payment of the pension, to make clear that the government took full responsibility for the payment. This indicates the state will cover the deficit if necessary.

The ministry announced four possible scenarios on how to change the pension premium and the target of income replacement rate to keep the fund running. The four options come after President Moon Jae-in rejected the initial plan last month, citing lack of public opinion.

“It was difficult to come out with one solution,” Park said at a press conference at the Government Complex in Seoul.

According to the first proposal, the government will maintain the current structure with the income replacement rate set at 40 percent and the insurance premiums at 9 percent. The basic pension for the elderly will increase to 300,000 won a month starting 2021.

The second proposal will raise the basic pension to 400,000 won in 2022, leaving the current insurance premium and income replacement rate unchanged, which will increase the amount of pension a person can receive to 1.01 million won per month.

The third option would raise insurance premiums to 12 percent and set the income replacement rate at 45 percent. The subscriber is expected to receive 919,000 won monthly.

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The fourth plan sets the premium at 13 percent and income replacement rate at 50 percent with the total pension payout to be 971,000 won per month.

“The proposals maximized the consideration of public sentiment, interest rates and income replacement rates,” Park said. “We will select a proposal that best fits the public sentiment during the legislative process.”

The scheme will be reviewed at the Cabinet meeting and submitted to the National Assembly by the end of this month.