The Democratic Party of Korea singled out "closing gaps in National Pension coverage" as the top priority for structural pension reform and stressed that the state should put in more fiscal resources to expand premium support for low-income earners, young people, women, and workers in special forms of employment.
The Democratic Party's Special Committee on Pension Reform held its third policy forum at the National Assembly on the 7th and discussed "plans to close gaps in National Pension coverage and expand credits." Earlier, the ruling and opposition parties agreed in March this year to raise the premium rate (amount paid) from the current 9% to 13%, and the income replacement rate (amount received) from 40% to 43%, respectively.
Accordingly, starting next year the nominal income replacement rate (pension amount relative to average income) of the National Pension will rise to 43%. However, critics say that if the coverage gaps in the National Pension—people who are not enrolled or cannot properly pay premiums—are not closed, the intent to guarantee income in old age by raising the income replacement rate will not be fully realized.
Nam In-sun, a lawmaker who serves as Chairperson of the Democratic Party's pension special committee, stressed in opening remarks, "Closing the gaps in National Pension coverage is the highest priority in structural pension reform."
Kim Yun, a lawmaker who co-hosted the forum, said, "One out of three people is in a blind spot. In other countries, the state supports premiums for those in coverage gaps, but our state premium support is extremely limited," adding, "The National Pension is becoming a strange system that turns its back on the socially vulnerable while protecting those who are relatively better off. We must not leave this situation unattended any longer."
Kim added, "This requires a lot of fiscal resources, so it cannot be done all at once, but the government needs to set goals, principles, and phased plans and then provide premium support and fiscal input to close the gaps."
Kim said, "The biggest strength of Korea's National Pension is that it has a massive reserve," adding, "If additional state finances are injected into the National Pension to close coverage gaps, the size of the National Pension will grow further, and the revenue from fund management will increase."
According to the National Pension Service (NPS), as of the end of June this year, the coverage gap in the National Pension—those not enrolled or unable to pay premiums—amounted to 33.6% (9.98 million people) of the population aged 18 to 59 (29.69 million). This includes 6.63 million non-enrolled people excluded by law from mandatory enrollment, such as recipients of basic livelihood benefits and full-time homemakers; 2.76 million granted "payment exemptions" due to job loss and other reasons; and 590,000 long-term delinquents who have not paid premiums for more than a year.
Also, according to the Korea Institute for Health and Social Affairs (KIHASA), as of 2022, the number of "one-person non-wage workers"—those who work without employment contracts, such as workers in special forms of employment, platform workers, and freelancers—surpassed 8.47 million, and most of them are outside the National Pension system. As of the end of 2023, the National Pension enrollment rate among young people aged 18 to 24 was only 24.3%, leaving young people also in a coverage gap.
In response, the government has announced measures to ease the premium burden. Starting in January next year, it will support premiums for all regional subscribers with monthly income of 800,000 won or less. In addition, childbirth credits will apply from the first child rather than the second, and military service credits will be extended from a maximum of six months to up to 12 months.
Participants stressed the need for more proactive measures to encourage enrollment by those in coverage gaps. They proposed expanding premium support for regional subscribers; promoting the conversion of special-form and platform workers to workplace subscribers; and supporting young people's first-ever pension premiums for a certain period.
Chairperson Nam said, "In particular, workers in special forms of employment and platform workers face wide gaps, and with the number of non-wage workers exceeding about 8.47 million, they need to gain worker status," adding, "We should also broaden premium support benefits for low-income regional subscribers."
Nam continued, "Because the National Pension enrollment rate among young people is very low, under the Lee Jae-myung administration we should also push a policy in which the state supports young people's first-ever National Pension premiums to build up their enrollment periods." The idea is to first create enrollment records for young people through this measure and supplement their enrollment periods later by using the deferred payment system. Nam also said, "Military service credits should be expanded to cover the entire period of service."
On childbirth credits, Nam said there have been no tangible benefits, adding, "We should change the payment point to the time of childbirth and expand state funding from the current 30% to the full amount."
Yoo Hee-won, a research fellow at the National Pension Research Institute, said, "Our country has lower security and coverage in premium support than other countries," adding, "In the case of childbirth credits, European welfare states guarantee at least two years per two children. We have also recognized enrollment periods starting with the first child and lifted the cap, but in the mid to long term we should review system reforms to levels comparable to foreign countries." Yoo added, "In most foreign countries, premiums are supported during the period of unemployment benefit receipt. We should review that as well."
Jegal Hyun-suk, a lecturer in the Department of Social Welfare at Hanshin University, said regarding the conversion of special-form and platform workers to workplace subscribers, "For vulnerable employers, we could actively consider supporting premiums in part through credits."