The government on Friday announced four different proposals for reforming the national pension scheme that center on getting the most out of the available resources.
The Ministry of Health and Welfare, which oversees South Korea’s National Pension Service, the world’s third largest, with 630 trillion won ($564 billion) in assets, announced the differing drafts after President Moon Jae-in called for an overhaul of the ministry’s draft on reforming the national pension scheme in a way that better reflects public opinion.
According to the first proposal, the government would maintain the current scheme with an income replacement rate set at 40 percent and insurance premiums at 9 percent. The proposal would only increase the basic pension to 300,000 won per month in 2021.
This, in conjunction with the separate National Pension, will allow a person who earns an average of 2.5 million won a month to get 867,000, if he or she pays premiums for 25 years.
The second draft would raise basic pension to 400,000 won in 2022, without changing the current insurance premiums and income replacement rate. This would increase the actual amount that a person can receive to 1.01 million won per month.
The ministry said the third option would raise insurance premiums to 12 percent in order to achieve the pension’s income replacement rate of 45 percent, with total pension provided hitting a monthly 919,000 won.
According to the fourth plan, the pension’s income replacement rate would be increased to 50 percent, with insurance premiums set at 13 percent, and total pension paid to people reaching 971,000 won per month
Over the past 10 years, South Korea has jacked up state health insurance premium rates each year, except for 2009 and 2017, with the annualized increase rate averaging 3.2 percent over the period.
In August, South Korea’s state pension fund said it is on course to be depleted in 2057 under the existing system amid a low birth rate and sluggish economic growth. (Yonhap)