President Yoon Suk Yeol outlined his blueprints for pension reform proposals in a rare national address Thursday, vowing to make the fund, one of the world's largest with assets worth 1,113.5 trillion won ($834.7 billion) as of May, more sustainable to ensure that younger generations will benefit from the system in the decades to come.
Yoon's initiation of pension reform — a policy drive often described as notoriously unpopular — came at a time when he was already grappling with low approval ratings and intense confrontations with opposition parties.
According to Gallup Korea, Yoon's job approval ratings have not reached the 40 percent threshold since July 2022, following a brief three-month honeymoon period. His support has hovered around the 30 percent mark, especially following the ruling party's significant defeat in the April general election this year, and has remained at that level.
In his televised briefing on state affairs Thursday, Yoon aimed to appeal to younger generations concerned about paying into the National Pension System for years only to be unable to draw from it in the future. Yoon promised to implement legislation that would guarantee pension payments to all contributors under any circumstances, potentially allowing the country to use the state budget to make up for the losses in the event of the NPS fund depletion. The contribution increase rate will also be differentiated between age groups so that younger generations pay less than those in the older age cohort.
He also pledged to ensure all senior citizens eligible for a basic pension -- a separate state-sponsored post-retirement plan other than the NPS -- could receive at least 400,000 won per month before his term ends in 2027, up about 20 percent from the current level.
"We need a fundamental overhaul of the current pension system, which led to the senior citizens' poverty and the young generation's distrust," Yoon said.
The government will come up with the so-called "automatic balancing mechanisms." Yoon said these could "guarantee long-term sustainability," aimed at automatically adjusting the pension level depending on the pace of population aging and the average income growth. Through these measures, political discourse will no longer be required in the readjustment of pension income level.
Currently, a South Korean worker is to pay 9 percent of his or her income. Those employed may split the contribution with their employer, each contributing 4.5 percent. After the pensioner reaches age 65, five years after they reach the mandatory retirement age, they will be eligible to receive at least 40 percent of their preretirement annual income. Payments depend on when they started and for how long they have contributed. South Korea will have the income replacement ratio decrease gradually from 50 percent in 2008 to 40 percent until 2028.
This contrasts the fact that, at the nascent stage of the National Pension Service, an individual only paid 3 percent of their wage, and took 70 percent of the preretirement annual income, prompting backlash in every pension reform to ensure the pension's sustainability.
What changed course is the drastic population aging and the declining birth rate. In other words, fewer South Koreans give birth and people tend to live longer. As of end-2023, South Korea's birth rate fell to 0.72, from 0.78 in 2022, while the life expectancy here reached 83.6 years.
The depletion of the public pension is drawing near, although its net asset value exceeded 1,000 trillion won, for the first time in 2023.
According to an official calculation in 2023, the mandatory pension scheme under the National Pension Service is forecast to deplete by 2055, as pension spending will outsize contributions starting in 2041.
Behind reform drives
An expert noted that Yoon's decision to push for pension reform does not seem to be a calculated move, as he likely would not have pursued such an unpopular policy if he had been mindful of his low approval.
"An administration that cares about popularity would have never dared to touch upon (pension reform)," said Shin Yul, a political science professor at Myongji University.
"It is incorrect to say that the reform is beneficial to Yoon and his administration. If this reform is for the good of the nation, we cannot say it is a beneficial one, but a necessary one."
Another expert said Yoon could earn the image of an earnest leader willing to risk his presidency to resolve one of the nation's biggest challenges.
"Pension reform is a divisive agenda and will leave the public dissatisfied, but everyone knows that the reform is a must," said Eom Ki-hong, a political science professor at Kyungpook National University. "Yoon has made a desirable choice, which could present an image of a leader doing a job that is supposed to be done."
But Eom also pointed out that Yoon's other reform initiatives have faced major pushback from opposition parties and stakeholders involved due to his unbending posture. His push for medical reforms triggered a massive walkout of trainee doctors and has left the domestic health care system fatigued, verging on dysfunctional.
"Yoon's new reform agenda would be plausible. Nevertheless, Yoon has to work with the ruling and opposition parties anyway to push the reform," Eom added.
In a high-stakes presidential briefing on state affairs, Yoon might also attempt to steal the limelight from Han Dong-hoon, Yoon's political lieutenant-turned-dissident who was elected to lead the ruling People Power Party in July. Most recently, the conflict between the two, who formerly worked together as prosecutors for decades, flared up again over the Yoon administration's push to increase the medical school enrollment quota from next year.
"A rift runs deep not only between the ruling bloc and the opposition, but also within the ruling bloc, so Yoon's briefing on state affairs could be used as leverage to cement his control over others in the ruling bloc," Eom said.
Yoon is trying to steal Han's thunder "by addressing the nation's important social agenda," posed Lee Jae-mook, a political science professor at Hankuk University of Foreign Studies
"But that is just a guess," he added. "Yoon wants to take the initiative in the reform agenda, but I'm not sure if it could actually work."
At a press conference followed by his address, Yoon said that he believes that the US would not tolerate North Korea's violation of the nonproliferation treaty when asked about Washington's potential change of course from its pursuit of North Korea's complete denuclearization after the presidential election in November.
"I never imagined that the United States would tolerate North Korea's (refusal) to completely denuclearize and its violation of the nonproliferation treaty."
He added that the three-way cooperation of South Korea, the United States and Japan agreed upon at the Camp David Summit in August 2023 will "remain unchanged after new leaders take office" in Washington and Tokyo.
