A bipartisan group of lawmakers in their 30s and 40s on Sunday voiced disagreement with the National Assembly’s approval of a reform to the national pension scheme, saying that the plan will increase the financial burden on future generations.
The group of eight lawmakers, who claimed they voted against the pension reform proposal passed in a plenary vote held Thursday, also highlighted that the plan merely focuses on adjusting the rates of the pension scheme. The eight lawmakers were: People Power Party Reps. Kim Yong-tae, Kim Jae-sub and Woo Jae-jun; Democratic Party of Korea Reps. Lee So-young, Jang Chul-min and Jeon Yong-gi; minor opposition Reform Party Reps. Lee Ju-young and Chun Ha-ram.
“The older generation will become the beneficiary of the increased benefits, while the burden will be placed upon the future generations,” said Rep. Kim Jae-sub of the People Power Party, reading a joint statement at a press briefing held at the National Assembly.
"The latest pension reform plan essentially offers immediate benefits to the older generation while raising the contribution rate for future generations,” he added.
The eight lawmakers, all in their 30s and 40s, are considered relatively young compared to most members of the parliament. The median age of the 300 members in the current 22nd National Assembly stands at 56.3.
Under the proposed scheme that passed last week in a 193-40 vote — with 44 having abstained — an eligible worker's contribution rate in proportion to their income will begin to inch up gradually by 0.5 percentage points annually, from 9 percent in 2025 to 13 percent in 2033. A contribution rate of 9.5 percent is projected to be implemented in 2026.
The income replacement rate — the percentage of a worker's preretirement income paid out as a pension, for those who have contributed to the reserve for 40 years and receive pension income starting at the age of 65 — will increase to 43 percent of preretirement annual income starting in 2026. The rate currently stands at slightly over 40 percent.
The eight lawmakers stressed that the passage of the latest scheme has managed to delay the national pension fund’s depletion, but fails to work as a solid resolution.
“The adjustment in the rates might have slightly delayed the timing of the fund’s depletion, but a moment (when we will be) unable to handle the payouts will eventually arrive,” they said in the joint statement.
Lawmakers proposed funneling the pension income tax paid by pensioners back into the pension scheme, rather than simply adjusting the contribution rates. Rep. Lee So-young of the Democratic Party previously argued that using the pension income tax would help ensure the fund’s sustainability. Currently, the government directs this tax — amounting to approximately 780 billion won ($533 million) annually — into the state coffers, where it is allocated as part of the national budget, according to the lawmakers.
The rival parties must also renegotiate the matter and draft an improved version of the scheme, they added.
Echoing the eight lawmakers' sentiments, several political heavyweights, in recent days, called for acting President Choi Sang-mok to veto the pension reform proposal.
Former People Power Party interim leader Han Dong-hoon said "If we stick with the latest proposal, (the aging baby boomers) who were born in the '60s and went to college in the '80s will be the main beneficiaries by contributing (less) and receiving more," in a Facebook post. "But the young generation who has to pay the higher contribution rate for several decades in order to receive the pension -- they have to take the fall."
Former lawmaker Yoo Seong-min, the founder and a former presidential candidate of the now-defunct Bareun Party on Friday said, "Choi must exercise his veto power," and highlighted the need for the rival parties to start another round of talks to redraft the proposal.
Founder of minor Reform Party and Rep. Lee Jun-seok also said Choi must veto the proposal, as it fails to bring about a "structural reform" to the public pension fund, in a Friday press briefing.
The latest proposal, once implemented, would mark the country’s first major reform of its mandatory state pension under the National Pension Service since 2007.
The public pension fund, the world's third-largest with 1,212.9 trillion won in assets as of the end of 2024, is expected to be depleted by 2056 without reforms, weighed down by South Korea’s low birth rate and rapid aging.
mkjung@heraldcorp.com
