The Past and Future of Korean Pension System: A Proposal for a Coordinated Development of the Public-Private Pensions

Korean pension system is at a crossroads. National pension - introduced in 1988 and still young - is facing a question of long-term financial sustainability. It is projected to be depleted by around 2040 even with its recent parametric reform. On the other hand, special occupational pension schemes for civil servants, military personnel and private school teachers have long been in financially weak status. Korean public pension system carries a problem of unviable contribution-benefit imbalance built in its design giving too generous benefit to its first generation participants and leaving too much burden to its next generation. In this paper, a reform proposal is suggested and detailed for a coordinated integration of public-private pension schemes into a viable and modernized multi-pillar system, in which is included a programmed conversion of the current mandatory retirement allowance scheme into a corporate pension system.