Friday, December 1, 2006

Korea: National Assembly to overhal pension system

As disbelief in the effectiveness of the national pension system mounts, the National Assembly's Health and Welfare Committee passed a set of bills Thursday to overhaul the nation's controversial pension system.

According to the reform bill, national pension fees will be increased and the pension grant rate will be lowered, assuming that the ``basic old-age pension system'' is to be introduced.

The basic old-age pension is aimed at benefiting upwards of 60 percent of the population aged 65 and older, by giving out 70,000 won to 100,000 won per month to those living below the poverty line and 50,000 to others.

The reform bills call for reducing post-retirement payments to 50 percent of monthly salary from the current 60 percent by 2008 and raising subscriber contributions from 9 percent of earnings to 12.9 percent, by 2018.

The Ministry of Health and Welfare has estimated that additional tax revenues of about 19.1 trillion won will be needed by 2030 to carry out the basic old-age pension system. But some say the reform will place too much of a burden on the public.

``The need to reform the national pension system was discussed because the excessively high national pension grant rate was likely to cause national pension funds to run out, which could burden our descendants with larger taxes,'' said an official from the Federation of Korean Trade Unions, one of the nation's two flagship labor unions.

``In this sense, the recently invented basic old-age pension system is unlikely to improve the overall system. If the basic old-age pension system is carried out without further deliberation, the national pension system would soon face trouble again,'' the official said.

The pension reforms have been stalled for three years because of disagreement among political parties.

Source:  Korea Times.

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