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Video Description

Type: KIHASA Policy Featurette

Topic: Protect the National Pension Fund

Guest Speaker: Professor Yang Jae-jin, Yonsei University

Transcript

If we wait too long to take action on the National Pension Fund, it’ll be like pouring money into a bottomless jar later. Just as the government currently supplements the civil servant pension with money from the national treasury, we’d eventually have to do the same once the Fund starts to run dry. But if we act now―by allocating just a portion of the funds we’d otherwise need 30 to 40 years from now--we can prevent the “jar” from leaking in the first place. That’s why I believe this is a truly sound idea.

One way forward is to raise the contribution rate quickly. If that proves difficult, another option―similar to what Japan did―would be to allocate a portion of the revenue from a value-added tax increase. For example, raising the VAT by just 1 percentage point would generate about 7.5 to 10 trillion won annually. Channeling this into the fund every year for 10 years, or taking similar steps, could stabilize it. This way, both present and future generations can benefit, and today’s generation wouldn’t feel wronged either, because the benefits they’re promised are significantly greater than what they’re contributing.

As we discussed earlier, the return ratio is about 1.8, nearly double. Even if we raise the contribution rate to 15%, the return ratio would still be around 1.3 to 1.4. The National Pension is indeed a high-performing fund.

So if the beneficiaries―whether through VAT or another means―contribute a bit more now to pre-fund the system, it’s not really a sacrifice. And from the perspective of the current generation, it’s not unfair either.