South Korean President Yoon Suk Yeol said on Thursday that the national pension needs urgent reforms. It is one of the world’s largest funds with $860 billion of assets. He urged reforms to make it more equitable and to ensure income security for an ageing population.
Yoon said that there was a loss in confidence in the pension systems for generations. He emphasised on the need for sustainable reforms to restore the trust of those who need it in retirement.
“Now is the time to fundamentally reform the national pension system that has the confidence of neither the elderly nor the youth,” he said.
Yoon suggested an increase in the contributions paid to ensure the fund is sustainable. He said the rate of increase differentiated between age groups to make it more equitable.
“We will pursue reforms that will be persuasive to the youth who will be paying into the fund the longest and will be receiving pension the last.”
“A pension system that leaves the elderly poor and young people suspicious must fundamentally be reformed,” he said.
South Korea’s public pension fund is currently the world’s third-largest with 1,113.5 trillion won ($833.98 billion) in assets. It is expected to be depleted by 2055 as payments start to outpace contributions from 2041.
Mandatory Pension
The contribution rate into the pension scheme is at 9% of income in South Korea. In U.S.A it is 10.6% and in Japan it is 18.3%. For members of the Organisation for Economic Co-operation and Development (OECD), it is 15.4%. The pension scheme is mandatory for wage workers in Korea.
The average payout is 31.2% of average pay, compared to the OECD average of 50.7%. This means that South Korea’s elderly are among the poorest out of OECD economies.
Several South Korean Presidents have wanted to reform the system. However, there has been very little progress on how to approach the issue.
Yoon also said he was pushing ahead with ambitious healthcare reforms. He said the focus is now on improving the quality of medical care in regions outside of large cities.
More than 10 trillion won will be invested over five years to improve services in those areas, he said.
