Experts unhappy with gov’t national pension reform measures: Survey

[Photo by Yonhap]

The South Korean government recently announced a reform plan for the national pension but critics call for improvement, such as differentiation in the premiums based on income rather than age and increase in investment yields by separating the National Pension Fund (NPS) Investment Management.

According to a survey conducted by Maeil Business Newspaper on Sunday on 13 civilian members who drafted the government’s national pension reform at the NPS finance committee under the Ministry of Health and Welfare, only one member gave a positive assessment of the recent reform plan.

The committee members offered harsh evaluation of the reform that was released by the government.

“The Health Ministry’s comprehensive management plan for the national pension should promote long-term fiscal balance, but, this time, there are no concrete and practical measures for fiscal stabilization,” said Oh Geon-ho, policy committee chairman at non-profit organization My Welfare State and former member of the NPS finance committee.

Yoon Suk-myung, a research fellow at the Korea Institute for Health and Social Affairs, criticized the reform as “an F-grade plan without a parametric reform.”

Nam Chan-seob, a professor of social welfare at Dong-A University, also said that “parametric reform, which should be the core, is absent.”

A member of the finance committee, who requested anonymity, also said that “a minimum of a 15 percent increase in the premium is needed to prevent the fund from being depleted.”

Jeon Byung-mok, a senior research fellow at the Korea Institute of Public Finance, was the only member who gave positive comments on the reform plan.

Jeon noted that “the conflicting perspectives of pension sustainability (fiscal stability) and income security, as well as limitations of a minority government where decision-making power is shared, must be considered.”

He also saw the government’s reform as an effort to secure room for compromise.

Directions for constructive reforms were also suggested.

“I don’t understand why the differentiation by age plan, which was never discussed at the finance committee, came up, while leaving out measures to raise the cap on premiums paid by those with higher incomes,” Nam said. “It is a plan that can only lead to intergenerational conflict. If the premium burden is to be different, it should be based on income and class, not age.”

Oh suggested that support for individually-insured subscribers with low income be strengthened further.

The government said earlier it will support up to 50 percent of the premiums of low-income subscribers.

“The new system for supporting the cities’ individually insured subscribers is meaningful,” Oh said. “But the scope of the eligible low-income group is too narrow and the support period is too short.”

Experts also emphasized that efforts for financial stability must be reinforced in future discussions at the National Assembly. “The pension premium should be increased by 0.5 percentage points every year up to 12 percent starting next year, and a consensus should be reached on the premium rate, income replacement rate, and eligibility age,” said Lee Joon-haeng, professor of economics at Seoul Women’s University.

There were also views that the NPS’s investment returns should be improved.

“It is necessary to discuss governance reforms to strengthen the independence and professionalism of the NPS Investment Management so as to increase returns of the national pension fund,” said another member of the finance committee.