Still dilly-dallying on pension reform?

The governing front must tackle the reform first in the upcoming legislature.

The pension reform drive is poised to run off the rails with no one commanding the steering wheel. The presidential office, the governing People Power Party (PPP) and the majority Democratic Party (DP) are singing different tunes to fan public distrust in the system. After outgoing National Assembly speaker Kim Jin-pyo proposed to fix the premium rate and income replacement rate during the current 21st National Assembly, which expires on May 29, to let the next legislature deal with the remaining structural reform, the presidential office and the PPP refused it. Earlier, DP leader Lee Jae-myung proposed a meeting with President Yoon Suk Yeol to discuss the issue, and then offered to accept the PPP’s outline.

Pension reform is a president’s responsibility. Leaders staked their political life on reforming their national pension system. But in Korea, the opposition leader came forward while the president stayed on the sidelines. Lee reluctantly agreed on the need for pension reform during a presidential TV debate in 2022, and has never made any proposals since. Then he suddenly pushes for the reform with just a few days left before the current legislative term ends. And yet, one cannot just dismiss his proposal.

President Yoon repeatedly stressed the need for the legislature to pass the pension reform bill in the next National Assembly. The government and the PPP are faithfully following Yoon’s instructions. The president persistently stressed the importance of pension reform, but his administration was sitting on its hands until the last minute. Although the rival parties nearly reached a bipartisan agreement on the first reform in 17 years, the president wants to deal with it in the next National Assembly without clear grounds.

The presidential office and the PPP claim that the reform will be incomplete without structural overhaul, but they have never come up with an outline on structural reform, nor clear guidelines on changing the premium and income replacement rates. Do they really think such a package reform is possible?

The governing front must tackle the reform first in the upcoming legislature. First of all, it must fix its position on how to form a special committee, how to adjust the pension and income replacement rates and how to implement the scheme. It must also decide if it will merge the scheme with the basic pension and other social benefit programs, or if it will adopt macroeconomic indexation or an automatic adjustment mechanism to reflect structural factors, such as an aging population, to adjust pension benefits. If government does not hurry up, the reform drive will face a stalemate due to the 2026 local elections and 2027 presidential election. The pension is gathering a deficit of 50 trillion won ($37 billion) a year. Yoon must meet Lee to hasten the process.