In light of the impending demographic catastrophe that could jeopardize the security of the country’s multibillion dollar pension system, South Korean President Yoon Suk Yeol promised on Thursday to overhaul the program.
With the lowest birth rate in the world, South Korea’s population is aging quickly. In 2023, the average lifetime number of children for a woman was predicted to be 0.72, a significant decrease from the so-called replacement rate required to maintain population stability.
The nation has the third-largest pension fund in the world, but it is predicted to run out quickly because there aren’t enough new contributors because of the demographic catastrophe.
“We need to fundamentally reform the current pension system, which works poorly for the elderly and has not got the trust of the youth,” Yoon said Thursday at a policy briefing.
South Korea’s pension fund is valued at more than 1,113.5 trillion won ($834 billion), but projections by the government indicate that the fund’s growth will cease by 2041, and it is anticipated to be depleted by 2055.
This is mostly because it used to be uncommon to be eligible for full pension benefits, but ever since then, baby boomers, who have easier access to pensions, are starting to retire after making lifetime payments.
According to Yoon, the goal of the revisions is to “restore trust in the National Pension Service” by establishing a sustainable system that offers “intergenerational fairness and income security after retirement”.
According to a recent study, over two-fifths of Koreans in their twenties and thirties said that reforming the pension system was necessary “to ensure that I can receive a pension in the future”.
According to Yoon, he will work toward changes that the younger generation—who “pay the longest, pay the highest premium, and are the last to receive a pension”—will find acceptable.
He also announced plans to extend credit benefits to individuals who have children or complete military service, so “there is no gap in the pension subscription period”.
