[Translation]
Ahn Cheol-soo proposes transitioning to a Swedish-style defined contribution pension system…Kim Sung-joo warns that misinterpretation of misinformation will only worsen elderly poverty
Ahn Cheol-soo, a member of the People Power Party, attending a meeting for lawmakers who have been elected for four or more terms at the National Assembly in Yeouido, Seoul on the 15th. 2024.4.15/News1 ⓒ News1 Reporter Song Won-young
(Seoul=News1) Reporters Gu Jin-wook and Roh Sun-ung = There was heated debate among lawmakers on social media on the 5th regarding the reform proposal for the National Pension under the National Assembly’s special committee for pension reform.
On this day, Ahn Cheol-soo, a member of the People Power Party, stated on his Facebook that he proposes transitioning to a Swedish-style defined contribution (DC) pension system for the MZ generation and future generations.
Ahn stated, “The National Assembly’s pension reform proposal was flawed from the outset. The public consultation committee under the National Assembly’s special committee for pension reform voted on the proposal ‘Pay a little more and receive much more with Ahn,’ which increased the insurance premium from 9% to 13% and the income replacement rate from 40% to 50%.” He criticized this as a reform that deviates from the purpose of pension reform, which is the sustainability of the National Pension system, except for delaying the depletion of the fund by 7 to 8 years compared to the other proposals.
He argued, “The proposals voted on were not between ‘financial stability or income security,’ but mere ‘tinkering.’ Both the majority and minority proposals of the special committee for pension reform are only small differences, disguising the ‘proposal to bankrupt the pension system’ as ‘income security.'”
He added, “The pensions of the 1 million baby boomers cannot be supported by the small number of future generations born to 20 or 30-somethings or less than 200,000 people. If we miss the golden time of pension reform, the 20s, 30s, and future generations will end up with a debt bomb. There is no time to hesitate any longer.”
He then proposed △transition to a Swedish-style defined contribution system and △ unifying special occupational pensions such as public officials and teachers with the National Pension into a common pension system. The defined contribution system is a scheme where the amount of pension received varies based on the amount contributed by the individual and the investment returns.
Ahn emphasized, “Reforming pensions starting with school, public official, military, and then the National Pension is urgent. While exceptions may be necessary for military pensions, the current method of pouring taxpayers’ money continuously into special occupational pensions is not sustainable. Pension reform and reform of special occupational pensions must go together.”
Kim Sung-joo, a member of the Democratic Party, speaking at a press conference analyzing detailed results of the 2024 pension reform discussion hosted by the Movement for Strengthening Public Pensions on the 1st at the National Assembly Members’ Office Building in Yeouido, Seoul. 2024.5.1/News1 ⓒ News1 Reporter Song Won-young
In response, Kim Sung-joo, the opposition party’s rapporteur for the pension committee, directly refuted on his Facebook later in the day, saying that all the claims, like Ahn’s, “that sound appealing are based on inaccurate understanding and misinformation about the pension system.”
Kim said, “In order to transition to a DC system like Sweden, the country must already guarantee sufficient post-retirement income,” adding, “The elderly poverty rate must be very low, around 5%, for a DC system transition to be feasible.”
Kim warned, “Transitioning to a DC system prematurely in South Korea, which has the highest elderly poverty rate among OECD countries, will worsen elderly poverty,” and criticized, “Blindly adopting a system from another country can lead to disaster. The introduction of a DC pension in Chile is a representative case of failure.”