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Benefits to Be Slashed in 2004;Public Outcry Seen
By Lee Chi-dong, Financial Times
Korea - National pension
benefits are likely to be reduced from next year, while premiums are
expected to increase, according to an official of the Ministry of Finance
and Economy (MOFE).
He said the likelihood of the
income replacement rate for National Pension Fund recipients decreasing
from the current 60 percent to 50 percent from next year was increasing.
He added that the move follows
the release of estimates showing that the current scheme may become
unsustainable after 2035.
The replacement rate refers to
the amount of money a person can receive from the pension corporation
compared to his or her average income during the time they paid premiums.
In addition, the official said
the pension premiums may increase by 6 percentage to 15.95 percent for
five years from 2010.
``He measures could draw flak,
but must be contemplated in order for fiscal stability to be restored to
the national pension system,ĄŻĄŻ he said, adding that if changes are
made, the pension fund will remain in the black until at least 2050.
However, the ministry said there
were two other proposals that will be addressed by the pension fund review
committee late this month.
One of the proposals outlines an increase in premiums to 19.85 percent
with the replacement rate remaining unchanged at 60 percent, which is
favored by labor unions and civic groups. The other plan, though viewed as
being unrealistic by many in the 20-organization review committee,
outlines slashing the replacement rate to 40 percent, while keeping
premium increases down to 11.85 percent.