NPS report on pension age causes controversy

The National Pension Service (NPS) has recommended on upward adjustment of the pension eligibility age, stirring up controversy. While raising the age can delay the depletion of pension funds, experts point out that most Koreans don’t have enough income to make it until they reach retirement age.

Lee Yong-ha, a senior researcher at the National Pension Research Institute under the NPS, pointed out in a report that most developed countries have raised the state pension age to 67 from 65, due to deteriorating finances.

“Of course, they aren’t raising it abruptly. It is gradually being raised to 67, and by the 2020s, 67 will have become the norm,” he said.

“Moreover, some countries have decided or are considering raising the retirement age to around 70, due to rising life expectancy.”

In the United Kingdom, for instance, men start receiving their pensions at 65 and women at 60, but the ages are scheduled to be increased to 66 for both genders by 2020, and to 67 by 2026 or 2028. The pension age in France is also scheduled to be raised to 67 in 2023 from the current 65, following reforms in 2010 and 2013.

Koreans, meanwhile, can start receiving their pensions when they reach 61. However, following the pension reform in 1998, the pension age is scheduled to be gradually raised to 65 by 2033.

While Korea has been maintaining the pension age at 65, Lee said the country has room to further raise the age since actual retirement in Korea is much higher than the Organization for Economic Cooperation and Development (OECD) average. Korea’s official retirement age is 60, but most Koreans continue working after their official retirement.

“Korean males’ real retirement age is 71.1 on average, around six to 11 years higher than OECD members such as Germany and France,” Lee said.

He also said the ceiling on the pension subscription age should be raised to around 65 from the present 60. Currently, those aged 60 or older can’t contribute to the pension fund. Lee said it deprives subscribers of the opportunity to increase their pension.

While raising the retirement age can be an option to delay the depletion of the pension fund, some experts say that this is neglecting reality.

“The poverty ratio of Korea’s senior citizens is the highest among OECD member countries. Up to 28.9 percent of senior citizens are engaged in economic activity, much higher than the OECD average of 13 percent,” said Prof. Choi Hye-ji at Seoul Women’s University.

“Senior citizens in Korea can’t get out of poverty even though they work hard. Behind their poverty is the weak state pension.”

She pointed out that Koreans retire from their regular jobs at 53 on average, despite the official retirement age of 60. After that, they seek new jobs, earning only one third of what they used to make.

The NPS has been facing multiple problems recently, including the exodus of key asset managers and involvement in the political corruption scandal. After relocating to Jeonju, North Jeolla Province, around 40 employees of NPS Investment Management quit.