By Lee Kyung-min
The state-run National Pension Service (NPS) is expected to extend the mandatory subscription period to the age of 65, five years longer than the current 60, to counter growing concerns over the fund's sustainability amid the plummeting birthrate compounded by the soaring number of retirees, sources said Friday.
According to the Ministry of Health and Welfare, the NPS and the National Assembly Health and Welfare Committee, the government is seeking to include the plan as part of its comprehensive, long-term pension management. The ministry will hold a public hearing next Friday.
The hearing follows the recently wrapped-up fourth financial review, which concluded the NPS fund will be exhausted by as early as 2056, up to four years earlier than was previously expected in a 2013 review. Since 2003, a group of private experts has held a review every five years to facilitate effective management of the state-run institution.
The plan is also expected to include maintaining the income replacement rate _ the percentage of a worker's pre-retirement income that is paid out by a pension program after retirement _ to the current 45 percent by scrapping earlier plans to reduce it to 40 percent by 2028. The initial rate set for 70 percent since the NPS was established in 1988 was first reduced to 60 percent in 1998, further down to 50 percent in 2008.
The committee said it discussed whether to increase the monthly premium rate to up to 13 percent, up 4 percentage points from the current 9 percent, a rate that has remained unchanged for 20 years due to public sentiment against any increase. The initial 3 percent rate set in 1988 increased to 6 percent in 1993 and 9 percent in 1998. The government's most recent move to increase the rate to 15.9 percent in 2003 failed due to fierce public protest.
The committee said the government may create more income brackets, based on which monthly premiums levied, to help subscribers shoulder the financial burden more equitably.
Critics say, between the limited options of increasing the rate for monthly premiums or reducing the payout, the government must choose the former due to Korea's elderly poverty rate that is the highest among OECD countries. Data from Statistics Korea released last year showed the poverty rate of those over 65 was 49.6 percent as of 2013. According to 2012 OECD data, Korea's poverty rate was 49.6 percent, far higher than the 12.4 percent average of OECD member nations.
The country's two umbrella unions _ the Federation of Korean Trade Unions (FKTU) and the Korean Confederation of Trade Unions (KCTU) _ have demanded the government guarantee an increased amount of pension payout.
"Reforming the NPS towards a bigger payout was one of the major campaign pledges of President Moon Jae-in. Repeated claims on the depletion of the pension fund followed by constant fearmongering is nothing but a government tactic to threaten ordinary citizens, whose post-retirement plans heavily rely on their pensions, into agreeing with the rate hike," the KCTU said in a statement.
"The government should begin deliberations participated in by all representatives of union and civic groups and NPS subscribers, instead of government officials," the FKTU said in a statement.
According to the Korea Institute for Health and Social Affairs, the number of pension recipients is expected to nearly quadruple from 4.39 million in 2016 to almost 17 million by 2060.