[Editorial] Pension time bomb is ticking

We hope the government and politicians hammer out a satisfactory solution before it’s too late.

The national pension reform drive has gone back to the starting line. The draft of a reform scheme presented by a civilian advisory board of the National Assembly on Monday suggests the legislature’s attempt to shift the responsibility for solving the conundrum to the government. The conundrum refers to readjusting the premium rate and the income replacement ratio, the core of pension reforms. The legislature said it will concentrate on reforming civil servant and teacher pensions instead. But that’s not convincing.

Earlier, the civilian panel agreed to gradually raising the premium rate from 9 percent to 15 percent. Over whether to maintain the current income replacement rate of 40 or raise it to 50 percent, panelists had a heated debate. Our premium rate has remained intact for 25 years while the OECD average is 18.2 percent. The civilian board took the right direction overall.

The fiscal projection for the national pension backs the need to revamp the current system of paying less and taking more. At the current pace, the pension fund will be in the red from 2041 and totally run out by 2055. As the projection was based on the expected birth rate of 1.21 in 2046, the situation can get worse if the ultralow birth rate of 0.81 continues.

After the legislature withdrew from the pension reform, the civilian panel’s effort became futile. Rep. Kim Sung-ju, a Democratic Party (DP) lawmaker and a member of the special committee for national pension reform in the National Assembly, said that the question over the premium rate and the income replacement rate cannot be agreed on easily, shifting the burden to the government. If the government draws up a comprehensive reform plan, the legislature just has to approve it or not, he said. His counterpart in the People Power Party (PPP), Rep. Kang Gi-yun, joined him, saying, “Structural reform of the national pension must come first.”

Lawmakers would not want to tackle the costly reform as it will not help them win votes in parliamentary elections next year. But the pension reform is unavoidable. Unless it is fixed today, losses will snowball tomorrow. All the demand for pension reform owes much to the past administration’s reluctance to deal with it.

But the Yoon Suk Yeol administration cannot be free from responsibility. It must lead the discussion aggressively. Nevertheless, the welfare minister was busy denying that the conservative government had agreed to a 15 percent increase in the premium rate. The ball is in the court of the government. Yoon pledged to push the pension reform even though it is not popular. His administration promised to devise a plan by October. We hope the government and politicians hammer out a satisfactory solution before it’s too late.