Published : 2013-10-01 19:27
Updated : 2013-10-01 19:27
President Park Geun-hye’s revised pension program for senior citizens is going to be a hard sell, as it faces strong resistance from the main opposition Democratic Party.
On the campaign trail last year, Park pledged to introduce a universal basic pension plan that gives all senior citizens aged 65 or older a monthly allowance of 200,000 won, regardless of their income.
Yet last week, the government scaled back the plan, citing an unexpected revenue drop due to the slow economic recovery. The revised scheme proposes to pay between 100,000 won and 200,000 won a month to the poorest 70 percent of elderly people.
Under the modified plan, a person’s basic pension benefit is inversely linked to the duration of their subscription to the National Pension Scheme. Specifically, a person who has subscribed to the NPS for up to 11 years is entitled to 200,000 won. Then the benefit is cut by 10,000 won for each additional year of subscription to the NPS so that a person with a subscription period of 20 years or longer only receives 100,000 won.
The tweaked version faced opposition from a totally unexpected figure ― Health and Welfare Minister Chin Young. Chin, who has just resigned from his position, strongly opposed linking the basic pension to the NPS in a fashion that penalizes people who pay into the NPS for a longer time.
Chin was concerned that the new proposal would trigger a backlash from NPS subscribers, who might choose to stop paying into the national pension to avoid being shortchanged. He feared this could shake the NPS to its foundations.
Park dismissed Chin’s concerns and justified the scaled-back version on the grounds that it was designed to reduce the burdens of future generations and make the new pension program more sustainable.
She also asserts that it is simply untrue that the modified plan puts people who have subscribed to the NPS for a longer period at a disadvantage. She argues that the longer a person subscribes to the NPS, the larger combined (national pension plus basic pension) benefit they will get.
This explanation is somewhat misleading. A person’s combined benefit increases over time only because their national pension benefit increases in proportion to the subscription period. When seen in terms of the basic pension alone, it is undeniable that people who have subscribed to the NPS for a longer period face a larger disadvantage.
The glaring defects of the new proposal were not lost on lawmakers of the Democratic Party. Denouncing Park for reneging on one of her key campaign promises, they vowed to restore the original version.
Yet DP legislators should not ignore the need to tweak the original plan in light of the government’s limited financing capability. Together with their colleagues from the ruling Saenuri Party, they are supposed to find a way to make the new pension program not only fair but also sustainable.