Korean president blasts parties’ pension agreement

Korean president blasts parties’ pension agreement
President Park Geun-hye.

President Park Geun-hye on Monday criticised the scale of the latest deal on the public servants' pension reform as falling short of public expectations, amid growing complaints that it was hastily reached by rival parties.

"(The agreement on) pension reform has slightly reduced the financial burden (to operate the system), but it is regrettable that the scale of reform fell short of people's expectations," Park said at a meeting with senior secretaries at Cheong Wa Dae.

The remark came three days after rival parties agreed to raise the contribution rate of public service pensions from 7 per cent to 9 per cent in the next five years, while reducing entitlements from 1.9 per cent to 1.7 per cent in stages over 20 years.

The reform measure is expected to save about 333 trillion won (S$410 billion) from 1,980 trillion won in public funds estimated to be spent to operate the pension system over the next 70 years.

The president's discontent came as her party had originally pushed to raise the contribution rate to 10 per cent and cut the entitlement to 1.65 per cent to garner savings of nearly 429 trillion won.

Park, who returned to work Monday after a week of bedrest, welcomed that the parties could strike a deal before the deadline, saying it was a step forward for her reform drive both in public and private sectors.

She, however, voiced her opposition over the agreement to increase payouts from the national pension system for the general public, which many fear will raise the burden on taxpayers.

She stressed that the matter required the people's consent first and needs to be discussed separately from the reform bill on public servants' pension system.

While her remark did not imply that she would use her veto powers to block the plan, she clearly disapproved of the parties' decision that was made beyond their authorities.

"An institutional change to modify the nominal income replacement rate of the national pension, which has about 20 million subscribers, would place a huge burden on the people," she said.

"It is something that must seek the people's consent beforehand and also a matter that should be decided carefully after forming a social consensus."

As per the unexpected bipartisan agreement the nominal income replacement rate ― the percentage of a subscriber's annual income that is paid out each year on retirement ― will be raised to 50 per cent from the current 40 per cent.

This means an employee would receive about 50 per cent of his annual income as pension after retirement.

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