Ruling and opposition parties are getting closer to resuming discussions of pension reform.
Choo Kyung-ho, floor leader of the ruling People Power Party, proposed last week to restart discussing pension reform, which had not materialized in the last term of the National Assembly. His counterpart of the main opposition Democratic Party of Korea, Park Chan-dae, responded positively, offering to start discussing pension reform quickly so that it could be concluded within the current term of the Assembly.
Though their remarks came belatedly, two months after the new parliamentary term began, their consensus on the need to discuss pension reform is welcome.
In May before the end of the last Assembly session, the rival parties agreed to increase both contributions to the pension fund and the amount of pension payouts.
They reached a consensus on raising the contribution ratio from the current 9 percent to 13 percent, but differed over how much to increase the income replacement ratio. The Democratic Party wanted a 3 percentage point hike to 45 percent, while the People Power Party demanded a lesser increase to 43 percent. Later, Lee Jae-myung, then the leader of the Democratic Party, accepted the People Power Party’s compromise of 44 percent. Both parties came closer to the conclusion of pension reform.
But despite opposition from the People Power Party, the majority Democratic Party pushed through the plenary Assembly session its bill to appoint a special counsel to investigate the accidental death of a Marine. The People Power Party boycotted all Assembly sessions, and demanded that pension systems be structurally reformed along with hikes in both contribution and income replacement ratios. Finally, pension reform foundered amid political confrontation.
After the new session of the National Assembly opened, the parties vowed to push pension reform as their top priority, but they clashed over every issue. The Democratic Party pushed the special counsel bill and other controversial bills again, and the president vetoed them again. Pension reform and bills related to the livelihoods of the public were laid aside.
The leadership of the ruling and opposition parties agree on the need to resume discussion of pension reform. But considering that they showed consensus amid public criticism that they disregarded public livelihoods to concentrate on political strife, whether they will actually resume discussions and reach a deal this time remains to be seen.
They still differ on the way of reform. The Democratic Party demands a concrete reform plan from the government. The government and the ruling party take the stand that both contributions and income replacement ratios should be raised, but that fundamental structural reform should be discussed as well at the same time.
In October, last year, the government announced a pension reform plan that contained scenarios of different ratios. It came under criticism for avoiding responsibility by tossing the ball into the court of the Assembly.
The point of pension reform must lie in extending the sustainability of the pension fund. Increasing contributions has an effect of delaying the time when the fund becomes exhausted, but raising the income replacement ratio has an effect to the contrary. The parties need to review if increasing both numbers is the best option. Reform is necessary, but it must trend toward the most effective way.
Ultimately, structural reform of the whole system is unavoidable. But pension reform is urgent, as the fund is fast shrinking. The first step of pension reform is to adjust contributions and income replacement ratios. It is reasonable to take one step at a time rather than trying to deal with everything at once. Above all, the government has to present its concrete reform plan to the Assembly without delay.
Pension reform is regarded as taboo in election season because it is an unpopular move that will increase the economic burden on voters. No elections are scheduled before June 2026, when local elections will be held to choose provincial government heads and councilors. This year and next year are the best time for pension reform. It is better for the parties to reach some agreement by the end of this year.
