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개인연금도입을 위한 정책방안연구(Research on policy measures to introduce personal pensions)

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Title 개인연금도입을 위한 정책방안연구(Research on policy measures to introduce personal pensions)
Similar Titles
Material Type Reports
Author(Korean)

나동민

Publisher

서울:한국개발연구원

Date 1994
Series Title; No 정책연구시리즈 / 93-21
Pages 73
Subject Country South Korea(Asia and Pacific)
Language Korean
File Type Documents
Original Format pdf
Subject Social Development < Social Welfare
Holding KDI; KDI School

Abstract

This study examines policy measures required to introduce personal pensions by examining the ongoing trend of growth of elderly population and policy related to this topic.
Faced with both a fertility rate and a rising number of elderly persons, Korea must address challenges of aging population. By 2020, 16 percent of the population of 50 million will be younger than 14 years of age, and 20 percent of the population will be older than 60. In contrast, in 1990, persons aged between zero and 14 accounted for 25 percent of the population and those aged 60 or older accounted for 8 percent of the total population of 43 million.
Unfortunately, Korea provides no income security for the elderly. Only current employees can benefit from the introduction of corporate pensions, and it is not easy to establish a corporate pension system, as the average career length is decreasing.
Korea has implemented pension policy since 1988 for people between 18 and 60 years of age, and it is divided into two sections: pension policy for farmers and fishermen (free to subscribe to and withdraw from), and employment pension policy that compels companies with more than 10 employees to secure pensions. As of the end of 1991, the number of total employees in all businesses in Korea reached 4,769,000. As the fees paid by pension holders during their employment is higher than pension fees rewarded after retirement, companies may find it difficult to maintain stable finances due to the aging of the population. This concern persists despite the pension policy established for individuals who withdraw or join half-way.
In addition, there is an issue of fairness between generations, as the tax burden and the burden that falls on the government increases due to a lack of funds. A public official pension of 885,000 subscribers is expected to exhaust its funds in the 2000s, because its measuring rate is higher than that of national pension. Military pensions of 147,000 subscribers have some limits in that they require constant pension fund support from the government, but the government faces rising a financial burden due to the deficit.
In contrast, economically advanced countries including Japan, the United States, the United Kingdom, Germany, and France show fair operation of pensions, as four to eight percent of people age 65 or older hold public pensions, six to seven percent corporate pensions, and nine to ten percent hold private pensions.
It is estimated that, after retirement, the high income bracket requires 60 to 70 percent of their pre-retirement income, and the low income bracket requires 90 to 100 percent of their pre-retirement income to maintain the living standard they enjoyed before retirement, with income security guaranteed. Therefore, Korea must establish a systematic income security program for the elderly and set up a personal pension system to guarantee a certain income level after retirement. Corporate pensions are insufficient as a long-term income security system for the elderly, with shortcomings such as low average employment duration, imperfect corporate management, lack of finances, introduction of unemployment insurance in 1995, and an increased burden of payment for national pension falling on corporations. If a personal pension system is introduced, the quality of citizen welfare will be increased, expenses can be reduced for public pensions, and government financial burdens will be alleviated by the reduction of the budget for social security, because funds can be secured through tax benefits, and the inflow of funding can be accumulated to be used as long-term funds. Furthermore, invigorating the capital market and converting pensions into operational funds will contribute to the national economy. For optimal operation of this policy, regulations should be established for implementation, payment period should be extended and payment methods should be improved, pension withdrawals for reducing tax payment should be prevented, and pension products that encourage stability and are developed to meet the needs of those who may subscribe to pension should be also considered.