SEOUL- South Korea’s government on Wednesday proposed reform plans to delay the depletion of the country’s $855 billion public pension fund, which is on track to run out of funds by the mid-2050s due to a rapidly ageing population.
The detailed proposal by the welfare ministry comes after President Yoon Suk Yeol’spledge last week to make the pension system more equitable and sustainable.
In the proposal, the ministry said it would raise the contribution rate of the mandatory pension scheme for the first time since 1998 to 13 percent of income, from the current 9 percent , to bring it closer to an average of 15.4 percent for members of the Organization for Economic Co-operation and Development (OECD).
The pace of increase, however, will be adjusted by age group to make it equitable – by 1 percentage point each year for those in their 50s, 0.5 percentage point for people in their 40s, 0.33 percentage point for those in their 30s and 0.25 percentage point for those in their 20s.
The ministry said it would also expand pension credits for childbirth and military service.
The nominal income replacement rate, the ratio of pension payouts to average income, will be kept at the current 42 percent , the ministry said. The rate had previously been set to be lowered to 40 percent by 2028.
Meanwhile, the pension fund will continue raising investments in overseas assets and alternative investments to raise its long-term investment returns by at least 1 percentage point to 5.5 percent or higher, which alone is expected to push back the depletion of funds to 2072.
