Starting next year, the contribution rate for the National Pension as a share of monthly income will rise from 9% to 9.5%.
According to the Ministry of Health and Welfare on the 29th, under the National Pension Act revised on Apr. in, the changed National Pension system will take effect starting in January next year.
First, the National Pension contribution rate will rise by 0.5 percentage points (p) from 9% to 9.5%. This is the first increase since 1998. The plan is to raise it by 0.5 percentage points each year to bring the contribution rate to 13% by 2033.
◇ Worker with monthly income of 3.09 million won will have to pay 7,700 won more per month in premiums
For business site subscribers to the National Pension, the employee and employer each pay half of the premium, while regional subscribers must pay the full amount themselves. For example, a business site subscriber with a monthly income of 3.09 million won will see the monthly premium rise by 7,700 won from the previous amount. For regional subscribers, the increase is 15,400 won per month.
To help low-income regional subscribers facing a heavier burden, the government decided to subsidize premiums by up to 37,950 won per month for regional subscribers earning less than 800,000 won a month.
The income replacement rate for new subscribers, including young people, will increase from 41.5% to 43%. The income replacement rate is the share of a person's lifetime average income paid as a pension. For example, if a person with a monthly income of 3.09 million won enrolls in the National Pension starting next year and pays premiums for 40 years, the person could receive 1.237 million won per month under the previous standard, but will receive 1.329 million won per month going forward.
However, the 43% standard applies only to the remaining subscription period starting next year. In other words, a subscriber who is 50 next year will receive the 43% income replacement rate only for the 10 years from 2026 to 59, and the previous rules apply through 2025. A person who turns 20 next year and pays premiums without interruption for the next 40 years can receive the full 43% of income. There will be no change in pension amounts for beneficiaries who have finished paying and are already receiving pensions. The more time left to pay, the more advantageous it is.
◇ Childbirth credits to be "unlimited"… the more children you have, the more pension you receive
Starting next year, childbirth and military service credits will also be expanded. Under the current National Pension, additional subscription periods are recognized for childbirth or military service. Childbirth credits currently grant 12 months from the second child and 18 months from the third child, with a cap of 50 months. Starting next year, however, 12 months from the first child and 18 months from the third child are expected to be recognized with no cap. The more children parents have, the stronger their old-age income becomes.
Military service credits will increase from up to 6 months to up to 12 months. The ministry said, "We plan to gradually expand the recognized subscription period to cover the entire military service period."
Also, starting in June next year, the National Pension of working seniors will be reduced less. Currently, if a National Pension beneficiary's earned or business income exceeds the average income of all subscribers, a reduction rate of 5%–25% is applied by dividing the excess income into five brackets. In short, the more one earns, the less National Pension is paid. Going forward, if the monthly excess income is less than 2 million won, no reduction will be applied.
The ministry said, "The National Pension Act clearly states that the state must guarantee the stable and continuous payment of pension benefits," adding, "Although concerns are raised, especially among younger generations, about whether they will be able to receive pensions, pensions will be paid under any circumstances."