Publication: Korea : The Korean Pension System at a Crossroads
Date
2000-05-10
ISSN
Published
2000-05-10
Author(s)
World Bank
Abstract
Old age income security in Korea is at a
crossroads. The traditional system of family support is
giving way to formal retirement savings--most of it mandated
by government. Government employees and private school
teachers are obliged to participate in special occupational
schemes that operate on a pay-as-you-go basis while private
sector workers must contribute to the partially funded
National Pension Scheme (NPS). Employers must provide
retirement allowances, a retirement cum severance payment
program whose obligations are largely unfunded. These
schemes have evolved over several decades and are not based
on clear targets for the level of mandated retirement income
or sustainable payroll tax burdens. They currently pay
benefits to a minority of older Koreans. This means that
over the next few years only social assistance programs will
have a significant impact on the incomes of the current
elderly poor. This report presents several alternative
reform options. These include reforms to some elements of
the existing system as well as an integrated or systemic
reform option. The proposed reform allows younger workers to
opt out of the earnings-related portion of the NPS. The
combination of a mandatory private pension scheme--which
would replace retirement allowances--and a reduced public
pension scheme would result in a reasonable replacement rate
target. New entrants would be obliged to join this system
while older workers would continue to be covered by the
current scheme.
Citation
“World Bank. 2000. Korea : The Korean Pension System at a Crossroads. © Washington, DC. http://hdl.handle.net/10986/15146 License: CC BY 3.0 IGO.”