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[Editorial] Pension reform

Strong leadership needed to ease deficit

Sept. 23, 2014 - 20:43 By Korea Herald
A forum on how to reform public employees’ pensions was aborted Monday as members of the government employees’ union blocked proceedings in a National Assembly conference room. The conference, organized by the ruling party, was to discuss a reform plan proposed by the Korea Pension Association.

The forced cancellation of the forum demonstrates how arduous it will be to overhaul the debt-ridden pension scheme for civil servants. In fact, there has been a lot of talk about the issue for a long time, but no action on it, mainly due to strong resistance from government employees and a lack of political will.

The problem with the public employees’ pension scheme is simple: The pensioners receive much more than they pay in.

Retired public employees receive a monthly average of 2.19 million won, compared with 870,000 won for recipients of the national pension system, which covers those outside the civil service, military and education sectors. This means retired civil servants receive 2.4 times what they pay in premiums, compared with 1.7 times for other pensioners.

As such, the deficit is snowballing. The government poured 2 trillion won into the scheme last year to make up for the shortfall in the public employees’ pensions. If unchecked, the shortfall will increase to 7 trillion won by 2020. The nation can no longer afford to ignore what is shaping up to be a fiscal catastrophe.

The solution is simple: Pensioners should contribute more and receive less. The KPA’s suggestion calls for increasing premiums from 7 percent of income to 10 percent by 2026, which is a 43 percent rise. In addition, the pension payouts should be cut by 34 percent, the KPA says.

The plan would also gradually raise the age at which pensioners start to receive payments, to 65 by 2033. In all, the KPA suggests that all the public pensions, including those for soldiers and teachers, should be unified with the national pension scheme by 2055.

The KPA worked out the proposal at the request of the Saenuri Party and there should be more discussions before the government and the ruling party forge a public consensus. Members of the government employees’ unions thus should have participated in Monday’s forum to present their views, instead of blocking it. Moreover, they should be reminded that more than 60 percent of Koreans support the reform of the public employees’ pensions.

The leader of the ruling Saenuri Party, Kim Moo-sung, said last week that the party should reform the pension system “even if all government employees turn against the party.”

The same resolution and political leadership are required of President Park Geun-hye. Needless to say, the opposition should not use the issue to fan antigovernment sentiment.