S. Korea to raise pension contribution rate in different pace by age group

SEOUL, Sept. 4 (Xinhua) — South Korea’s government proposed to raise the national pension contribution rate in a different pace by age group and leave the income replacement rate unchanged, according to the Ministry of Health and Welfare on Wednesday.
The proposal requires wage earners to pay 13 percent of their income for pension premium, higher than the current 9 percent, according to the ministry.
The rate of pension premium stood at 3 percent in 1988 when the national pension program was introduced in the country, but the rate has stayed at 9 percent since 1998.
The rate of increase in pension contribution will be different in line with the age group for the first time.
The contribution rate for those in their 50s will be raised by 1 percentage point per year until it reaches 13 percent, while the rate for those in their 40s, 30s and 20s will be lifted by 0.5 percentage points, 0.33 percentage points and 0.25 percentage points, respectively.
The proposed reform bill is subject to approval from the National Assembly, where the liberal opposition Democratic Party has a majority of seats.
South Korean President Yoon Suk-yeol said last week that his government would pursue pension reforms acceptable to the younger generation who pays the most premium for the longest period and receives the pension at the very last.
Worries remained severe over a fast depletion of the national pension fund amid the rapidly aging population and the chronically low birth rate.
The state-run National Pension Service forecast that the national pension fund would record its first decline in 2041 before being depleted in 2055.
Meanwhile, the proposal left the nominal income replacement rate, which measures the proportion of pre-retirement monthly wage covered by the pension, unchanged at this year’s 42 percent.
After reaching 70 percent when the national pension program was adopted, the replacement rate continued to slip to 60 percent in 1999 and 50 percent in 2008. It was supposed to decline to 40 percent by 2028.
The government also planned to adopt a so-called automatic adjustment program in a bid to adjust the amount of pension based on demographic changes and economic conditions. ■