Proposed increased income rate could double National Pension scenarios

Kim Yeon-myung, head of the National Pension’s advisory body, announces at a plenary meeting of the National Assembly’s special committee on pension reform, on Sep. 4. [Photo by Yonhap]

The Financial Calculation Committee, an advisory body under the National Pension, will likely increase the current income replacement rate after its recent pension reform proposal that would make prospective pensioners pay more and receive their pensions later. Proponents of this increased rate for income replacement argued that the insurance premium would double while pension benefits remain unchanged under the recent proposal.

During a plenary meeting of the National Assembly’s special committee on pension reform on Monday, Kim Yeon-myung, head of the National Pension’s advisory body, emphasized the importance of a balanced reform plan that considers all stakeholders’ perspectives.

The draft proposal last introduced by the committee during a public hearing on September 1 only included a recommendation to raise the premium rate to 12 percent, 15 percent, and 18 percent while maintaining the income replacement rate at 40 percent. The proposed increase in the income replacement rate was omitted due to significant disagreements between the majority faction that prioritizes fiscal stability, and a minority advocating enhanced income replacement. Proponents for a higher income replacement rate counter proposed an income replacement rate of 50 percent with a 13 percent premium rate, but this suggestion clashed with the fiscal stabilizers’ stance, leading to the resignation of two committee members just before the public hearing.

The two members who resigned from the income-enhancement group are preparing to submit their own individual report. “The report will be released by early October, before the Ministry of Health and Welfare’s comprehensive operating plan release,” Nam Chan-seop, a professor of Social Welfare at Dong-A University, said.

Following the public hearing, the committee will submit its final report with additional comments to the Ministry of Health and Welfare, which will present a final comprehensive operating plan to the National Assembly by the end of October.

As it has already outlined a reform plan including 18 scenarios related to insurance premium rates, eligibility age, and fund returns, adding the income replacement rate will expand the number of scenarios to a minimum of 36.