National Assembly Speaker Woo Won-shik, center, speaks during a meeting with Kweon Seong-dong, left, floor leader of the ruling People Power Party, and Park Chan-dae, floor leader of the main opposition Democratic Party of Korea, in his office in Seoul, March 18. Joint Press Corp

The ruling and the main opposition parties agreed Thursday on proposed plans to reform the nation's ailing pension system, in what would be the biggest overhaul of the pension fund in about 20 years if approved at the National Assembly later in the day.

Under the agreement signed by floor leaders of the two parties, the pension contribution rate was set at 13 percent and the nominal income replacement rate was set at 43 percent, according to their joint statement.

The agreement came after a meeting between Rep. Kweon Seong-dong, floor leader of the ruling People Power Party (PPP), and Park Chan-dae, floor leader of the main opposition Democratic Party of Korea (DPK). The meeting was arranged by National Assembly Speaker Woo Won-shik.

The last-minute agreement comes after lawmakers from the PPP and the DPK and Health Minister Cho Kyoo-hong agreed on pending issues of the pension reform proposal the previous day.

The DPK-controlled National Assembly is set to vote on the pension reform proposal later Thursday.

If passed at the National Assembly, it would pave the way for the nation to proceed with pension reform, in what would be the biggest overhaul of the pension system in about 20 years.

The rival parties have agreed to raise the pension contribution rate to 13 percent from 9 percent.

Last week, the DPK accepted a proposal by the government and the PPP on raising the nominal income replacement rate to 43 percent.

Adjusting the nominal income replacement rate, which indicates the proportion of pre-retirement monthly wages covered by the pension, was one of the major sticking points for the proposed pension reform.

Established in 1988, Korea's pension system was originally designed to guarantee a certain amount of income after retirement. With the nation rapidly aging and its birth rate plunging, worries have grown that the younger generation would not receive pension benefits despite their contributions.

Under the current system, the pension system is expected to go into a deficit in 2041 and completely run out in 2055, according to the National Pension Service. (Yonhap)