National Pension Service (Yonhap)
High earners will pay pension premiums on a greater share of their salaries starting July, as the government seeks to shore up the pension system's finances.
The maximum amount of income subject to pension payments will rise from 5.53 million ($4,240) won to 5.9 million won, the Ministry of Health and Welfare said in a plan unveiled on Friday.
This means that anyone earning more than 5.9 million won will be paying 531,000 won in monthly national pension subscription payments, a rise of 33,300 won a month, or nearly 400,000 won a year.
At the same time, the threshold at the bottom end of the scale has also been raised, from 350,000 won to 370,000 won. People earning below this threshold pay a minimum amount regardless of the amount they earn. From July, it will rise 1,800 won to 33,300 won per month.
The plan was unveiled amid growing concerns over the depletion of the national pension fund due to Korea's aging society, low birthrate, the return rate of pension fund investment, and inflation. Korea’s total fertility rate hit a record low of 0.78 last year.
The National Pension Service (NPS) recorded dismal rates of return last year, at negative 22.8 percent on its investments in local stocks and negative 12.3 percent on its offshore stock investment. As of late last year, its total funds were worth 890.5 trillion won, 8.22 percent down from a year before.
According to the fifth National Pension Fund finance estimate released by the Ministry of Health and Welfare in January, the pension balance will turn red from 2041 and entirely run out of money in 2055, two years earlier than the previous estimate five years ago.
The first Vice Minister of Health and Welfare Lee Ki-il said Friday, "The ministry recognizes the need to revamp the current national pension scheme. The ministry will continue to discuss and establish a comprehensive plan and submit it to the National Assembly in October."
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