The Ministry of Health and Welfare (MHW) has published a Pension Reform Promotion Plan to reform the social security pension system (National Pension Scheme – NPS), for Parliament’s consideration. The most significant proposal is an increase in the combined employer/employee pension contribution rate, which has not been changed in 27 years. The plan’s measures are intended to improve the NPS’s long-term sustainability and strengthen pensioners’ income security. Currently, the country’s pension fund is projected to be depleted by 2056 (despite it being one of the world’s largest, with 1,147 trillion South Korean wons in assets). In addition, South Korea has the highest elderly poverty rate among OECD countries, with more than 40% of the population over age 65 falling below the poverty line (2023 OECD data). The reforms also revive the proposal to mandate that all employers provide a funded retirement plan.
Following are the main measures included in the reform plan:
The proposed reforms already faced significant challenges for approval from the opposition-controlled National Assembly before the recent attempt of President Yoon to establish martial law. Unpopular reforms promoted by an unpopular government do not bode well for the proposals, to say the least. That said, the MHW developed the reforms after consultations with various stakeholders with the intent to address a variety of widely recognized issues with the pension system. The proposals therefore can be an indication of reforms to come.