PENSION REFORM IN KOREA

The public pension scheme in Korea, especially the civil service pension launched in 1960 and the military pension launched in 1961, are facing serious financial problems, though the degree of problems is less serious in the pase of the private school teachers pension and the national pension system introduced much later. However, even these pension schemes are destined to face similar financial problems because of the inherent characteristics of low contribution, high pension. The Korean pension is at a crossroad. Without reforms the spending on the public pension scheme would rise to more than 10% of GDP by 2030. The pension system has to move toward a system less dependent on the state and on high payroll taxes of the future generations and a stronger private pension system. A systemic reform to pursue is a shift to a system that is partially defined contribution, funded and privately managed, rather than fully defined benefit, pay-as-you-go and publicly managed.