Have you heard about the word “Homo-hundred”? It is the neologism used by the UN in 2009. This word is a counterevidence that the average life expectancy of human has been increased than before. For this, preparing for old age also has become important. Of course, there are so many kinds of aged preparations but here, we will learn about pension system in Korea.
In Korea, the population is aging and its speed has proceeded at an unprecedented pace. According to the National Statistics Organization (NSO), Korea will enter super aging society in 2025. So there is a need of having much stronger social security, especially old age income security system accordingly. There are mainly three types of old age income security: national pension, retirement annuity, and personal pension. Then, let’s learn about our pension system in detail.
1. National Pension
The National Pension Service was established to provide pension benefits in contingency of old-age, disability or death of a breadwinner with a view to contributing to the livelihood stabilization for the promotion of the welfare of the nation. Unlike other pension systems, all residents in Korea from 18 to less than 60 years of age, regardless of their income, should join the system in case of national pension. Also, it has income reditributive effect. An annuitant can get more pensions proportionally to the inflation ratio.
2. Retirement Annuity
The retirement pension system has managed from 2005. The company accumulates a portion of severance pay at financial institution and when a worker retires, he can get the money in pension or a lump sum allowance. From the worker’s point of view, he can plan for his later years in a stable manner and from the company’s point of view, it can cut down on corporation tax and improve its financial soundness. In the future, the financial authorities will reform existing irrational commission system and we expect to enjoy a more healthy retirement
3. Personal Pension
One is not mandated to join the personal pension. Reasons why the personal pension was established are because first, there has been growing need of expansion of old age social security system. Secondly, it supplements public pension that is inadequate. A citizen who is more than 20 years old can join the personal pension and those older than 55 can receive pension after they save the money for more than 10 years. The FSS will come up with measures to invigorate the personal pension. The FSS will sell annuity insurance through the internet to encourage economically active young generation to join the pension.
by Han So-yeon