Policy Monographs
A Survey and Analysis for the Establishment of a Multi-pillar Old-age Income Security System: In-depth Analysis
- Author
Yun Seok Myung, et al.
- Publication Date
2011
- Pages
- Series No.
- Language
A Survey and Analysis for the Establishment of a Multi-pillar Old-age Income Security System
- In-depth Analysis -
An old-age income security system is a mechanism in which the government and society provide a minimum economic security to those retried from economic activities at older ages. In most developed countries, multi-pillar income security systems, those consisting of different plans of income security including public pensions, private pensions, and other income security plans, have long been established, enabling significant numbers of their citizens to secure a minimum level of living standards at older ages. However, as benefit payments of income security systems are estimated to ever increase due to population aging and the prolongation of average life expectancy, many countries are concentrating on setting up a sustainable old-age income security system.
As the income replacement rate of the National Pension is projected to decline to 40% by 2028, the need has been emerged in Korea for diversifying income risks by adding employer-sponsored retirement pensions, voluntary private pensions along with the National Pension to one’s income security portfolios. Now is the time for discussions for the sustainability of public pension and effective measures to respond to increasing expenditures for supporting older people support due to and accelerated by aging population and low fertility.
Fortunately, Korea has a multi-pillar income security system that consists of the basic livelihood security system, the national pension system, various retirement plans and voluntary private pensions, at least in appearance. However, there are some limitations in Korea’s multi-pillar income security system as, for example, there are some gaps in the National Pension and retirement plans are limited to those employees hired by companies providing good working conditions. As for voluntary private pensions, most owners of the plans, who belong to high-income groups, use these pensions for investment purposes rather than for income security measures for older ages, which further widens the income inequality between the haves and have-nots.
Against this backdrop, it is important to look at the state of beneficiaries of different pension plans and their perceptions on these plans to design, based on the survey and analysis results, an effective old-age income security system tailored to individuals’ needs. In particular, as for the National Pension, it is important to examine why there are people who cannot make mandatory payments and who are exempted from making payments, and the characteristics of these people by age and lifecycle to produce basic data for developing effective policy measures. To this end, this study is focused on the production and analysis of various basic data necessary for the establishment of an effective old-age income security system.