After many twists and turns, the National Assembly has finally passed the controversial “basic pension” bill, enabling President Park Geun-hye to make good on one of her key election pledges.
The Assembly’s action on the bill was much belated but welcome. The legislation, which is expected to go into effect in July or August, will benefit the poorest 70 percent of Koreans aged 65 or older.
Specifically, about 4.5 million of the nation’s 6.4 million senior citizens will receive a monthly allowance of between 100,000 won and 200,000 won, depending on their income. Of the beneficiaries, about 90 percent will receive the maximum 200,000 won.
This scheme is not exactly the same as what Park promised on the campaign trail. During the election campaign, she promised to pay a uniform monthly allowance of 200,000 won to all citizens aged 65 or older, regardless of their income.
She dubbed her scheme a “basic pension” to emphasize its universal coverage. It was much more generous than the old-age pension, which it was intended to replace. The existing program pays between 20,000 won and 96,800 won a month to the bottom 70 percent of the elderly population.
But it was increasingly clear that Park’s universal pension plan was beyond the government’s financing capacity. So last September, the government decided to scale it back.
The basic pension scheme, even in its original form, is hardly sufficient to eliminate widespread poverty among senior citizens. Korea’s relative poverty rate among elderly people stands at 49.3 percent, the highest among OECD nations.
Yet the program is surely better than the current old-age pension and will help make life a little easier for senior citizens in need of assistance.
But it is not without its problems. For one thing, it could destabilize the National Pension. For the beneficiaries who receive less than 200,000 won, basic pension benefits are inversely related to National Pension benefits. This could make some people feel that they are shortchanged and choose to drop out of the National Pension.
In fact, some 30,000 National Pension subscribers have already withdrawn from it. The government needs to convince the public that quitting the National Pension is not a smart idea because the longer they pay into it, the more benefits they get.
Now that the basic pension bill has been passed, the government also needs to ensure that senior citizens can receive the new allowance starting in July, as announced more than a year ago.