Seoul, South Korea – The government on Friday disclosed a plan to gradually increase the national pension premium rate in an effort to stabilize the financial health of the state-run pension system. The announcement comes amid concerns over the potential exhaustion of the pension fund due to the country's rapidly aging population.
According to a new release by Yonhap News Agency, the gradual increase in the pension premium rate is considered "inevitable" to ensure the program's sustainability. The ministry plans to differentiate the rate increase among age groups to maintain fairness but did not specify the exact details of how the increases will be implemented.
The National Pension Service earlier reported that the pension fund is projected to be depleted by 2055, beginning to post shortfalls in 2041. South Korea's current pension rate is approximately half of the level set by member nations of the Organization for Economic Cooperation and Development (OECD). The ministry will further evaluate "the proper level in consideration of drastic demographic changes."
While discussions about the nominal income replacement rate—determining the pension amount receivable after retirement—will continue, the ministry proposed a potential delay in the age that retirees receive payouts. Currently, the entitlement age is 63, expected to rise to 65 by 2033. The ministry suggested this could be postponed once better conditions for senior citizen employment are established.
To address worries among younger citizens about the depletion of the pension fund, the government aims to enact a law providing a government guarantee for pension payments due upon retirement. The monthly basic pension benefit for senior citizens is also set to increase from 300,000 won to 400,000 won, in line with the Yoon administration's policy goals.
The proposal did not cover eligibility revisions for the basic pension benefit, currently extended to those 65 and older belonging to the bottom 70% of income earners. Considering demographic projections, this benefit could apply to one out of every three South Koreans by 2050, raising questions about the system's long-term sustainability.
The ministry expressed a negative view on using state funds for pension finance and pledged to extend support for low-income and other vulnerable individuals.
The comprehensive plan will be submitted to the National Assembly by month's end following Cabinet deliberation and President Yoon's approval. Public opinions will be gathered in cooperation with the parliamentary pension reform committee, according to a ministry official.