(3rd LD) National Assembly passes pension reform proposal; 1st overhaul in nearly two decades
(ATTN: UPDATES with reaction from umbrella unions in paras 9-11)
By Yi Wonju
SEOUL, March 20 (Yonhap) — The National Assembly approved a landmark reform of the nation’s ailing pension system Thursday, in the biggest overhaul of the public pension fund in about 20 years that would make the fund more sustainable.
The revised bill on pensions passed a plenary session of the Assembly in a 194-40 vote with 43 abstentions, after the ruling and opposition parties reached a landmark agreement that calls for paying more in premiums and receiving greater pensions.
Under the scheme, the pension contribution rate will be raised from the current 9 percent to 13 percent, while the nominal income replacement rate will be set at 43 percent, compared with the current 40 percent.
The contribution rate will increase by 0.5 percentage point annually over eight years starting next year, while the income replacement rate will be set at 43 percent from next year.
National Assembly Speaker Woo Won-shik (C) poses for a photo with Kweon Seong-dong (L), floor leader of the ruling People Power Party, and Park Chan-dae, floor leader of the main opposition Democratic Party, during their meeting at Woo’s office in Seoul on March 18, 2025. (Pool photo) (Yonhap)
Earlier in the day, Rep. Kweon Seong-dong, floor leader of the ruling People Power Party (PPP), and Park Chan-dae, floor leader of the main opposition Democratic Party (DP), signed a joint agreement at a meeting arranged by National Assembly Speaker Woo Won-shik.
The last-minute agreement comes after lawmakers from the rival parties and Health Minister Cho Kyoo-hong agreed on pending issues of the pension reform proposal the previous day.
Last week, the DP accepted a proposal by the government and the PPP on raising the nominal income replacement rate to 43 percent.
Adjusting the nominal income replacement rate, which indicates the proportion of pre-retirement monthly wages covered by the pension, was one of the major sticking points for the proposed pension reform.
The country’s two major umbrella unions — the Korean Confederation of Trade Unions and the Federation of Korean Trade Unions — criticized the pension reform as “political collusion” between the ruling and main opposition parties, blaming it on the current leadership vacuum.
“The two labor unions strongly condemn the two major parties’ political collusion that has betrayed the people’s trust in the national pension and the will of the public and has undermined the purpose of the pension system,” they said in a joint statement.
The two union groups said the reform plan fell short of their call to increase the nominal income replacement rate to 50 percent, claiming the two rival parties reached the deal based on political calculations and that it failed to live up to the pension system’s purpose of income security for the elderly.
The National Assembly holds a plenary session on March 13, 2025. (Yonhap)
Established in 1988, South Korea’s pension system was originally designed to guarantee a certain amount of income after retirement. With the nation rapidly aging and its birth rate plunging, worries have grown that the younger generation would not receive pension benefits despite their contributions.
Under the current system, the pension system is expected to go into a deficit in 2041 and completely run out in 2055, according to the National Pension Service.
The depletion date of the fund is expected to be delayed by nine years under the revised system.
julesyi@yna.co.kr
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