On March 20, the National Assembly passed the pension reform bill for the first time in 18 years. While While both the ruling party and opposition parties evaluated this bill as a “dramatic success,” younger politicians and citizens are expressing concerns.

The National Pension Service (NPS) was first implemented in 1988, to ensure financial stability for people who are not economically active anymore. Initially, those who joined were required to pay 3% of their monthly income and in return, they received a pension with a 70% income replacement rate. In 1998, the first revision was implemented. The insurance rate increased to 9%, and the income replacement rate has been altered to 60%.

As the birth rate declined rapidly over time and the population structure shifted, concerns about the sustainability of the system emerged. Now, fewer working-age people have to cover the pension for the increased retired population, and the burden is expected to intensify for future generations. In 2007, the government implemented the second reform, which aimed to gradually lower the income replacement rate to 40% by 2028. While this reform succeeded in adjusting the income replacement rate, it failed in altering the insurance rate due to public opposition.

The recent reform includes altering the insurance rate to 13% and increasing the income replacement rate to 43%. While many agree that adjusting the insurance rate was a much-needed action, it is also criticized that merely adjusting the payment rates and delaying the depletion point by several years failed to provide a fundamental solution to its sustainability. Moreover, its slogan, “Pay more and receive more,” failed to convince the younger generation. Increasing the income replacement rate without providing a fundamental solution for sustainability is criticized as “shifting the burden” onto future generations. Many worry that they would have to pay higher insurance premiums only to face the depletion of the pension fund and receive nothing in return. The lack of mutual agreement with the younger generation also appears to have intensified their frustration.

The new reform bill should be only the beginning of pension reform; it cannot be the end of it. It is crucial for the government and the National Assembly to find ways to enhance the sustainability of the NPS and to build mutual understanding among different generations.