A national pension is a social insurance system in which people pay a certain amount of premiums to the government, which they receive back as an annuity in their old age.
There are two important rates.
The insurance rate and the income replacement rate.
The insurance rate is calculated by the following formula
Pension insurance premium = monthly basic income x pension insurance rate
The income replacement ratio is the percentage of the pension amount that the member's average lifetime income represents.
In other words, the higher the income replacement ratio, the more money you get back.
If the national pension system remains as it is without reform, it is expected to run a deficit starting in 2041 and run out of funds in 2055, according to a committee specializing in fiscal estimates.
This is due to a declining birthrate, aging population, and a slowing economy.
Currently, there is general agreement that the pace of declining birthrates will deplete the pension fund sooner than the government expects.
The current insurance rate of 9% was frozen in 1998.
Workers and employers (companies) pay 4.5% each.
A new rate of 12% or 13% is being discussed.
While there is a general consensus that insurance rates should be raised, the amount of the increase is a sensitive issue as it directly affects household finances.
The income replacement rate is currently 40%. The Democratic Party of Korea claims 45% and the People's Power claims 43%.
In the 21st National Assembly, the ruling and opposition parties failed to reach a consensus.
It is hoped that the 22nd National Assembly will be able to reach a social consensus.
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