This study seeks to examine and identify how the introduction of the National Pension will affect and change the household propensity to save. The Korean government plans to launch the National Pension System into full operation during its fifth Economic Development Plan period, thus guaranteeing at least some income for retirees in their old age. The implications and effects of such public and universal pension systems on the national economy and particularly on the household saving patterns are a major issue of interest in Korea and worldwide alike. This study appropriates the concepts of the lifetime income hypothesis in order to analyze the effects that the National Pension will exert on the three factors that decide the propensity to save, i.e., income, self-sufficiency, and retirement.
Once the National Pension is implemented, it can exert significant effects on the household savings. Although the pension aims to guarantee minimal income for retirees in their old age and protect them against various social risks of poverty, it invites controversies because it can disrupt the existing cycle of the national economy and might reduce savings. Detractors argue that such a pension system reduces the amount of disposable income for households and discourages people from saving for their old age in anticipation of the amounts of income and benefits they will receive from the government after retirement. These, however, reflect only a very narrow and fragmented view of the pension system. For ordinary people will still continue to want to save for post-retirement, as pension benefits guarantee only minimum living standards.
Nevertheless, it should be noted that the levels of contributions required and benefits provided under the National Pension System can profoundly alter the household saving patterns. The amounts of contributions they have to pay, the amounts of benefits they can expect to receive, and the changing amounts of wage can decide or alter working Koreans’ motivation to save. Alternatively, the pension system can spark a growing interest in the need to secure stable post-retirement living and thereby stimulate more savings. Individual and household saving patterns, in other words, depend not only on the amounts of disposable income people possess, but also on people’s lifestyles, expectations, beliefs, and the social conventions.
연금보험제도도입과 가계저축성향(Pension insurance system and household propensity to save)
|Journal Title; Vol./Issue||한국개발연구:vol. 4(issue 3)|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Macroeconomics
Social Development < Social Welfare
|Holding||KDI; KDI School|