Directions for fiscally and politically sustainable pension reform

Abstract

At this point, discussions on pension reform to adapt to the rapidly changing socio-economic environment are gaining more social attention than ever before. This study was conducted with the intention of presenting the direction of reforming the old-age income security system in Korea based on the trends of pension reform in major countries now that the issue of pension reform has emerged as a hot topic. As can be seen from the contents of this research report, Nordic countries are replacing the basic pension system, which is universally applied, with an income-related pension as the main axis of old-age income security, while introducing a minimum guarantee pension for the low-income class. In this direction, selection and concentration in the income security system are being strengthened. This is because the basis for existence of the Scandinavian welfare state itself based on Rawls' theory of justice was threatened by deepening polarization in income and working conditions following changes in the social and economic environment surrounding the pension system.

Our reality differs greatly from those of these countries in terms of the social and economic environment and the maturity of the old-age income security system. However, it is also our reality that we cannot stand by the reform trends of major welfare advanced countries that have already reorganized and operated pension systems in a sustainable way. It is a background that requires fact-based discussion while being aware of the various circumstances we are facing. The starting point of this study is the analysis of the current status of the old-age income security system in which we are facing. Based on this, the details of recent pension reforms in major European countries, which can give us policy implications, were carried out jointly with foreign experts. Through these studies, the current status of coping with each country was analyzed. Based on the latest pension reform trends in foreign countries, the reform direction was presented. This study also suggests the direction of the integrated operation of the national pension and the special occupational pension, including the public servants pension. This report focuses on presenting a desirable direction for reform rather than presenting specific details of pension reform. In a situation where we have not properly grasped the reality we are in, even if a specific reform plan is presented, it is unlikely that we will be able to obtain policy implications in terms of feasibility. An appendix to the report contains views on pension reform from various stakeholders in our society. This is to show the diverse views of stakeholders on the direction and urgency of pension reform.