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The Grand National and Uri parties have agreed to ratify revisions to the National Pension Act and a law guaranteeing basic welfare payments for the elderly. If the revised regulations are passed by the National Assembly, monthly pension contributions will remain at the present level of 9 percent of monthly salary, but payouts after retirement will decrease from 60 percent to 40 percent of a personĄŻs average income.
The basic welfare pay for pensioners is to cover 70 percent of all Koreans over 65, or 3.5 million elderly Koreans, with the amount gradually increasing from 5 percent of the average income for people in a pension program -- slightly less than W90,000 (US$1=W938) -- to 10 percent by 2028. Next year, the first year the tax-funded basic welfare payment for the elderly goes into effect, a whopping W2.3 trillion is needed, rising to W37 trillion by 2028. The very government which cut pension benefits for retirees out of concern over the gradual depletion of the pension fund is now adding a greater tax burden on the public.
Yet that 40 percent pension is the maximum people can get only after they have paid their contributions for 40 years. The actual average period for Koreans to pay their premiums is just 21 years. The vast majority of people will end up getting a pension of just around 20 percent of their monthly salary. You canĄŻt call that a pension: itĄŻs small change or milk money.
With basic welfare payments for the elderly, there will be cases where people who paid more donĄŻt get more. Suppose that A, who makes W2 million a month and pays W180,000 a month over 20 years, gets a monthly pension of W430,000. Now, it looks like the basic welfare payment for the elderly will be given to those whose income, including National Pension benefit, ranks in the bottom 70 percent, and the average monthly income of those 70 percent is expected to be around W500,000. As a result, A will get W70,000 a month in welfare payments to make up for the difference between the standard income of W500,000 and his W430,000 pension.
Now suppose B makes W1 million a month, pays W90,000 per month and gets a monthly pension of W310,000. That entitles B to the maximum W180,000 a month in basic welfare for the elderly. Combined with the monthly pension payment, B gets W490,000 a month. In the end, a person who paid W180,000 a month will get just W10,000 more per month than a person who paid W90,000 a month.
According to a recent opinion poll, 58.3 percent of respondents said they wouldnĄŻt join the National Pension plan if it wasnĄŻt mandatory. And just 26.1 percent said they would voluntarily join. Who in their right mind would want to join a pension plan and pay premiums if all they end up with is pocket money and distribution isnĄŻt even fair?
(englishnews@chosun.com )
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