Seoul: Senior lawmakers from the ruling and the main opposition parties were set to hold last-minute negotiations on pension reform plans on Thursday, a day after they reached a tentative deal aimed at reforming the nation's ailing pension system. On Wednesday, lawmakers from the ruling People Power Party (PPP) and the main opposition Democratic Party (DP) and Health Minister Cho Kyoo-hong agreed on pending issues of the pension reform proposal, raising the possibility it could secure bipartisan approval in the plenary session of the National Assembly later Thursday.
According to Yonhap News Agency, the parties are said to have agreed to include the phrase "bipartisan agreement" in the proposal for forming the pension reform committee, which the PPP had insisted on. They also agreed to expand pension credits to cover first-born children, from the current system that only grants credits starting from the second child. 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 DP 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, South 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.