▪ The National Assembly has established a special committee on pension reform to discuss reform measures for the four major public pensions and the basic pension.
▪ Discussions on the reform should focus on three aspects : enhancing the financial sustainability of the schemes, strengthening retirement income guarantees, and improving equity among the schemes.
▪ Under the current system, the national and private teachers pensions are expected to be depleted by 2055 and 2043, respectively.
▪ The deficits of the civil servants and military pensions are projected to increase under the current system.
▪ The national and private teachers pension system dependency ratios are expected to rise from 24.6 and 36.4 in 2023 to 120.8 and 154.1 in 2093, respectively.
▪ The national and private teachers’ pay-as-you-go cost rate will increase from 5.8% and 18.5% in 2023 to 34.2% and 46.2% in 2093, respectively.
▪ Increasing the national pension’s premiums by 1 to 3 percentage points (%pts) would delay the depletion of the reserves by two to seven years.
▪ Increasing the national pension’s replacement rate by 2 or 3%pts speeds up reserve exhaustion by one year and increases the accumulated deficit in 2093 by KRW 628.8 trillion and KRW 949.5 trillion, respectively.
▪ Raising the national pension age of eligibility to 66 or 67 would delay the depletion of reserves by one year and reduce the accumulated deficit in 2093 by KRW 544.7 trillion and KRW 1,028.5 trillion, respectively.
▪ The following are five potential scenarios based on assuming adjustments to premiums, replacement rates, pension age, and benefit determination from 2025 onward.
▪ The fiscal outlooks show that scenario 1, which only increases premiums to 15%, has the highest fiscal stabilization effect, and scenario 5, which increases premiums to 12% and converts to an income-proportional pension, has the lowest effect on reducing the benefit-cost ratio for those born in 1990.
▪ Under the current basic pension system, the total fiscal requirement is expected to increase from KRW 22.7 trillion in 2023 to KRW 33.3–109.8 trillion in 2093, depending on standard pension benefit levels.
▪ Total fiscal requirement scenarios based on adjusting the standard benefits and the scope of eligibility of the basic pension ranges from KRW 39.8 trillion to KRW 156.9 trillion in 2093.
▪ A 3%pt increase in premiums for the civil servants and private teachers pensions would reduce the accumulated deficit in 2093 by KRW 139.5 trillion and 52.2 trillion, respectively.
▪ Reducing the pension payment rate to 1.5% for the civil servants and private teachers pensions would lower the accumulated deficit in 2093 by KRW 85.9 trillion and 30.5 trillion, respectively.
▪ Raising the pension eligibility age to 67 for the civil servants and private teachers pensions would reduce the accumulated deficit in 2093 by KRW 81.3 trillion and 29.6 trillion, respectively.
▪ If the military pension’s premium, pension payment rate, and survivor’s pension payment rate are adjusted similarly to those of other occupational pensions, the accumulated deficit in 2093 is expected to decrease by KRW 67 trillion.
▪ Assuming matching premium and replacement (pension payment) rates of the national and occupational pensions
▪ The projections show different fiscal improvement effects for the national and occupational pensions.
▪ The redistribution functions of the national and basic pensions must be coordinated.
▪ Retirement pensions must be strengthened.
▪ Consider introducing an automatic adjustment device
▪ Disparities among beneficiaries outside the pension system must be considered when developing equity measures for the four major public pension systems.