As the ruling and opposition parties showed their willingness to agree on a pension income replacement rate of 43%, the government noted, "We respect the agreement of the ruling and opposition parties," while also stating, "We need to discuss the automatic adjustment mechanism as a key agenda item."
The Ministry of Economy and Finance said on the afternoon of the 14th, "We respect the agreement regarding the pension income replacement rate discussion, and we will closely consult with the National Assembly regarding the preconditions proposed by the opposition party."
On this day, the People Power Party and the Democratic Party found common ground on raising the insurance premium rate from the current 9% to 13%, and increasing the income replacement rate to 43%. The Democratic Party suggested three conditions in return: ▲ explicitly stating the government's payment guarantee ▲ expanding credits for childbirth and military service ▲ increasing support for insurance premiums for low-income individuals.
Although the ruling and opposition parties reached a broad agreement on pension reform, they showed differences in their positions regarding the establishment of a pension special committee and the automatic adjustment mechanism. The Ministry of Economy and Finance expressed, "We hope the pension special committee will be established soon," and stated, "The automatic adjustment mechanism must be discussed as a key agenda item in the committee and needs to be implemented."
The automatic adjustment mechanism is a system that adjusts pension amounts in relation to life expectancy or the number of pension subscribers to ensure the stability of pension finances. Among the 38 member countries of the Organisation for Economic Co-operation and Development (OECD), 24 countries are currently operating it.
The government holds the position that the automatic adjustment mechanism should be implemented to ensure intergenerational equity. Through the automatic adjustment mechanism, pension payments should be adjusted to prevent increased burdens on future generations.
The government revealed that even if the automatic adjustment mechanism is implemented, it would set a "minimum increase threshold for pension amounts" to ensure that individuals would receive more pension benefits than the premiums they paid. The Ministry of Health and Welfare believes that if the automatic adjustment mechanism is implemented, it could delay the depletion of pensions until as late as 2088.