Republic of Korea: Selected Issues

The paper discusses potential output, the output gap, and inflation in Korea. The paper explores the information content of potential leading indicators of inflation. A broadly balanced current account has been the suggested norm for Korea over the medium term. The challenge is to help build a more robust bond market that prices risk appropriately. The features of pension schemes in Korea and the problems they face are outlined. The paper reviews pension reform, banking sector, corporate sector, and foreign exchange crises with respect to Korea.

Abstract

The paper discusses potential output, the output gap, and inflation in Korea. The paper explores the information content of potential leading indicators of inflation. A broadly balanced current account has been the suggested norm for Korea over the medium term. The challenge is to help build a more robust bond market that prices risk appropriately. The features of pension schemes in Korea and the problems they face are outlined. The paper reviews pension reform, banking sector, corporate sector, and foreign exchange crises with respect to Korea.

V. Options for Pension Reform in Korea1

This chapter outlines the features of various pension schemes in Korea and the problems they face. Substantial financial risks are expected to emerge in the next three decades because of a rapidly aging population and the maturing of the pension system, which at present is still relatively young. The chapter also reviews the options for reform put forward by a task force established by the government.

A. Introduction

1. Many mature social security systems around the world are experiencing financial difficulties. Two factors have contributed to problem of large unfunded liabilities in public pension systems.2 First, rapidly aging populations have increased dependency ratios, i.e., the number of retirees relative to the number of persons in the labor force. And second, generous retirement benefits in many countries have compounded the strains.

2. Korea’s public pension system is relatively young and has not yet suffered from large-scale financial distress, but pressures are likely to emerge in the medium term. As the system is relatively new and has narrow coverage, the maturity ratio, defined as the number of beneficiaries to the number of contributors, is low.3 The government employee pension system, nevertheless, has already run into cash flow deficit and its reserves will be depleted in the near-to medium term. Further, there are indications that the national pension system will suffer from similar financial distress at a later stage when the system matures if no reforms are implemented to improve actuarial balances and if the mismatch between contribution and benefits persists.

3. The Korean government is aware of the potential financial risks in the public pension system. A “Pension Reform Task Force” was established in December 1998 to outline options to improve the long-term financial viability of the system. The task force’s report titled Basic Plan for Pension System Reform was made available for public debate in the latter part of 2000.

4. This chapter discusses the various reform options outlined in the report of the task force. Section B describes Korea’s current pension system, Section C discusses the problems within the existing system, Section D reviews the reform options, and Section E offers some concluding remarks.

B. The Current System

5. The National Pension Scheme was introduced in 1988. Prior to this, there was no public pension scheme with wide coverage—most private sector workers were covered only by a loosely regulated private retirement scheme, while government employees, teachers and military personnel were covered by occupational pension schemes provided by the government. As a result, most elder persons in Korea, especially those living in lower income areas, still have to depend on their own earnings, family support, and social assistance for retirement. With the establishment of the National Pension Scheme (NPS), however, coverage has been expanded and steps have been taken to strengthen the institutional framework of public pension schemes. According to the World Bank (2000) study, most Korean workers who reach the statutory retirement age in 2025 will be eligible to receive pensions from one of the formal pension schemes.

Publicly-mandated retirement schemes

6. There are several publicly mandated retirement schemes in Korea. First, there are three occupational schemes targeted to specific groups: one instituted for government employees in 1960, one for military personnel in 1963, and one for private school staff in 1975. Second, the NPS covers private sector employees and its operations are overseen by the National Pension Corporation (NPC). This system is relatively young—in 1998 it was estimated to have 14.2 million participants but only 0.2 million recipients. And third, the government also mandates that employers must provide “retirement allowances” (RAS), a form of privately managed retirement savings. This program also serves as a severance payment scheme as the benefits can be received upon termination of employment.

Coverage and contribution
  • Coverage under the NPS has been expanded recently to roughly 75 percent of the labor force. When the NPS was first introduced, it only covered employees in firms with more than four employees. In 1995, the self-employed in rural areas, farmers and fishermen were required to contribute to the scheme. In April 1999, an amendment to the National Pension Act extended coverage to the urban self-employed and small firms.

  • Coverage under the three public occupational pension schemes is limited by design. The special pension schemes for government employees covers all public servants in the central and local governments, including judges, policemen, railroad workers and public school teachers.4 Altogether, this group comprised about six percent of the labor force in mid 1999. The civil service pension scheme had 988,000 contributors and 73,000 pensioners. The pension schemes for government employees and for military personnel are now reaching maturation.

  • The RAS covers full-time employees in firms with more than five employees with an 8.3 percent of contribution from the employers.

  • The contribution rate under the NPS is nine percent for those covered under the scheme prior to its expansion, and three percent for the new entrants into the plan. The lower contribution rate is expected to converge gradually to nine percent by 2005.

  • Contribution rates are higher for the occupational schemes: 15 percent for the civil service and military schemes, and 13 percent for the teachers’ scheme. The dependency ratios are also higher than that of the NPS.

Benefits and eligibility

7. The several publicly-mandated pension schemes differ in terms of level of benefits, the accrual of the benefits, and forms of withdrawal.

  • The NPS is a defined benefit plan. The benefit formula is progressive and results in a 60 percent replacement ratio over a forty-year contribution horizon. The benefit is indexed to the CPI.

  • The occupational scheme has a maximum replacement ratio at about 75 percent for a 33-year career. The benefit for the occupational schemes is indexed to wage levels.

  • The RAS is mandated by the government for employers to provide a minimum one-time benefit equivalent to 1/12 of the worker’s final wage for each year of employment. The benefit is payable whenever the employee leaves the job.

8. Eligibility conditions also differ across schemes. A full pension under the NPS can be obtained at age 60, but a recent amendment will lead to a gradual increase to 65 by 2033. New entrants in the civil service scheme would need to work until age 60 to receive a full pension, but the grandfathered beneficiaries can retire with unreduced pensions as soon as they meet the minimum length of service conditions.

Private pension schemes

9. The government encourages investment in personal pension plans offered by banks, investment trust companies and insurance companies, savings institutions, and cooperatives by granting favorable tax treatment on the contributions and benefits. To qualify for the tax deduction, the. individual must agree to contribute continuously for at least ten years and cannot withdraw the pension until reaching the age of fifty five. Reliable information on the size of contribution by individuals is not available, but estimates suggest that total value of these private pension schemes amounted to about 11 trillion won as of mid 1996, or about 3 percent of GDP.

C. Problems with the Current System

10. Substantial financial risks in the pension system are expected to emerge in the next three decades because of three main factors: a rapidly aging population, the expansion of the coverage, and the maturing of the pension system (see Box V.1). All existing public or publicly mandated pension schemes are going to be affected by these three factors, and there are also some specific problems that are germane to each scheme. The analysis in this section will show that the total burden of financing all the publicly mandated pension schemes would be very high if the benefits were to be kept at the existing generous levels.

The Changing Environment for the Pension System

Korea has a relatively young demographic structure compared to the OECD average. However, the speed of increase in the elderly dependency ratio—defined as the ratio of people over age 65 to the working-age population—is one of the highest in the world.

A03bx1ufig01

Elderly Dependency Ratio

Citation: IMF Staff Country Reports 2001, 101; 10.5089/9781451822052.002.A005

The coverage of the NPS has been expanded three times since its inception, and in 1999 it covered almost 75 percent of the labor force.

A03bx1ufig02

Coverage of the National Scheme

Citation: IMF Staff Country Reports 2001, 101; 10.5089/9781451822052.002.A005

The number of beneficiaries will rise rapidly as the system matures. Even with the increase in the retirement age from 60 to 65 as planned, the number of recipients of old-age pensions is expected to rise by 15-fold to around 6.6 million over the next three decades.

The NPS and retirement allowances

11. The replacement ratio for the NPS and RAS is relatively high. Assuming a worker is covered under both the NPS and retirement allowances, the total replacement ratio for 35 years of services could generate a replacement ratio of 85 percent. As a result, there is an element of intergeneration redistribution because higher payroll taxes are called for to meet the demand of rising benefits over time as the system matures. In order to maintain the target funding levels, the tax rate would have to double over the next three decades. The younger generations entering into the NPS and the RAS will face a lower rate of return on their contributions.

12. In addition, the mandated retirement income for workers covered under the NPS and the RAS varies by age cohort and type of worker. The differences amongst workers within the same cohort are due to: (i) some workers, such as the self-employed are not covered by the retirement allowances; and (ii) the NPS builds in intrageneration redistribution through a progressive benefit formula, which generates a higher replacement ratio to workers with lower lifetime incomes. As a result of the progressivity in the system, the low-income group achieves a higher internal rate of return on their pension contribution.

13. There is also considerable contractual risk associated with the RAS. The RAS was originally set up to provide an old age pension when people retire and income support during unemployment. The RAS, however, is highly vulnerable because of it is unfunded. During the recession following the 1997-98 financial crisis, many firms were not in a position to make contributions to the scheme on behalf of their employees. Subsequently, the government reacted by establishing the Wage Guarantee Fund in July 1998 to cover for those firms that could not pay their obligations.5

14. In addition, fund management under the RAS is poorly regulated. Many firms record the liabilities associated with the retirement allowances on their balance sheet to take advantage of the tax deduction, since up to 50 percent of the total liability is deductible. The other half could also be deducted if the firm opens an insurance policy to cover the liability. In practice arrangements are often made with an outside financial institutions to lend the money back to the company.

15. The need for a RAS has diminished in the current environment which is markedly different from that when the system was first introduced. Key changes include a more mobile labor force and more frequent job changes, as well as the establishment of an unemployment system with broad coverage. More importantly, the recent financial crisis has highlighted the urgency to ensure funding of the scheme and to protect workers’ right by segregating funds from companies’ accounts.

Fiscal implications

16. The financial surplus of NPS is expected to be comfortable in the near to medium-term. The surplus is currently about two percent of GDP because of expanded coverage (and hence contributions) and the system’s immaturity, and this surplus is projected to peak in 2040 (see Figure V.1). Thereafter, however, deficits accumulate rapidly. In the short-run, the critical question is how to invest the surplus to generate enough cash flow when the system matures.

Figure V.1.
Figure V.1.

The NPS Financial Projection

(9% contribution)

Citation: IMF Staff Country Reports 2001, 101; 10.5089/9781451822052.002.A005

17. The surplus from a partially funded public pension scheme could have implications for other budget decisions. Starting in 2001, however, lending from the pension fund to the central government to cover its fiscal deficit in other areas will be disallowed, and old loans will not be rolled over, as dictated in the amended Public Funds Management Act (PFMA). Nonetheless, discretionary lending is not precluded. The current cash-based fiscal accounting, which does not take into account growing pension liabilities over time, could run the risk of spending too much on current programs than in the absence of the pension surpluses.

18. The NPS will start to run cash flow deficits when today’s labor market entrants retire. By the time the system fully matures, the deficits will vary between 5 to 8 percent of GDP. Maintaining all the current parameters of the system, the NPS reserve will be depleted by 2043. To keep the system financially viable in the long run, either the contribution has to be raised or benefits have to be cut, or both. A recent proposal by the National Pension Corporation would avoid deficits until 2080 by raising the contribution rate gradually to 17.25 percent in 2033 (see Figure V.2). In addition, the debt owed by the central government to the NPS will have to be repaid long before that, which would require the government to finance the debt repayment by borrowing in the market, or by cutting government spending, or by raising taxes, with adverse implications for growth and labor markets.

Figure V.2.
Figure V.2.

The NPS Financial Projection

(Increase of contribution to 17.25%)

Citation: IMF Staff Country Reports 2001, 101; 10.5089/9781451822052.002.A005

19. The fiscal implication of financing the NPS and RAS is serious. Financing the retirement allowances and paying long run NPS contributions to maintain its current target level of benefits would require raising government contribution to more than 25 percent of the covered wage bill or more than 10 percent of GDP.

Impact on capital markets

20. Most of the pension assets in Korea are not invested in interest earning financial instruments. It is estimated that only about ten percent of the retirement allowances is invested in assets held external to the companies, the rest is mostly lent back to the company as working capital. This significantly aggravates the risk concentration, precludes more efficient financial intermediation of resources, and distorts the debt and equity balance within companies. In particular, the absence of large contractual savings vehicles in the capital markets makes it difficult to develop longer term savings instruments and hinders the deepening of the financial market.

21. A large chunk of the assets in the NPS is on-lent to the central government as direct loans.6 Out of the NPS portfolio, less than five percent is invested in private securities, about four percent is invested in social welfare projects, and there are no foreign assets. As a result, the total return on the NPS portfolio is roughly the same on one-year treasury bills. The past practice of diverting these funds to finance other government operations has significantly reduced the internal rate of return on contributions. Observers have called for the National Pension Act to be further modified to preclude lending the reserves out as social investment, personal loans to members, and intragovernmental loans. Investment in listed instruments in the capital markets, and in high quality foreign securities would also be beneficial. In addition, an improved governance structure to eliminate bureaucratic discretion and impose a discipline on investment through the use of the benchmark portfolios with comparable risk profile will also be important.

Public occupational pension schemes

Civil service pension

22. The government employee pension provides more generous benefits than the NPS and the RAS and allows for early retirement. The benefit is equal to 50 percent of final salary for 20 years of service plus 2 percent of final salary per year of service up to a total of 33 years, resulting in a replacement ratio of 76 percent of final salary. In addition, a one-time retirement allowance benefit equivalent to 60 percent of monthly final salary per year of service is provided.

23. The financial situation in the civil service pension has been steadily deteriorating, and has been in deficit since 1998. The fund reserve could be depleted in 2001 despite the increase in contribution rate from 5½ percent for both the government and the employees to the current 7½ percent level. As a result, the GEPC has to borrow from the central government to finance its pension obligations. This has led to a higher fiscal deficit in the consolidated central government accounts. The civil service pension deficit is expected to widen further to about 3 percent of GDP around 2030 and stabilize at about that level thereafter.

24. In addition to the generous benefits, two factors have contributed to the deficit in the civil service pension scheme. One is the relatively early retirement age, which is encouraged because benefits stop accruing after 33 years of service. Further, even after the increase in minimum age of retirement to 60 for new employees, the system is still more generous than the NPS under which the minimum retirement age will eventually reach 65. The second factor is that the benefit formula is heavily back loaded. Benefits accrue more rapidly towards the end of the career, which discourages labor mobility. The lack of portability between public and private sector pension schemes further hampers the movement of labor.

Other public pension schemes

25. Other public pension schemes are also facing financial problems because pension benefits are too high relative to the contribution rate. The fund reserve of the Military Pension was depleted in 1977 and the central government has financed its operation since then; the Private School Teachers Pension is projected to incur deficits from 2012 and its fund reserve is expected to be depleted by 2018. Some estimates suggest that, to maintain the current regime of pension benefits, the contribution rates have to increase to 30 to 35 percent, an unsustainable level.

26. In the absence of reform, the impact on public debt dynamics of financing the various public pension schemes could be severe. Rough estimates indicate that the present value of liabilities accrued to date minus existing assets is about 30 percent of GDP under the NPS. The present value of the stream of deficits in the government employees’ scheme comes to another 25 percent of GDP, and the retirement allowances adds another 10 to 20 percent of GDP. Put differently, total implicit pension debt is larger than the total public debt.

Individual pension schemes

27. Private pension schemes were introduced in 1994 and are at a nascent stage of development. These schemes have a very limited role in providing retirement income with average balances in individual pension accounts of only W 3.7 million (about $3,000). Moreover, the reliability is low due to poor return on investment, unsound fund management and abuse of the fund as collateral for bank loans by the financial institutions.

D. The Policy Options

28. The analysis in the previous section identified several main areas where changes are necessary: overly generous benefits; varying levels of benefit for different groups of workers that are not justified by a public policy rationale; a large unfunded liability in all the publicly mandated pension schemes; and lack of portability of pensions for public and private sector employees.

29. A range of policy options are available to the government to address these issues for both the near and medium term. In the near term, publicly mandated pensions for private sector employees will not likely provide a substantial part of income for the elderly because of its limited coverage and low maturity ratio. Thus, it will remain important for the government to provide targeted spending on social welfare to alleviate poverty for the elderly poor. In the medium term, faced with insolvency in most of the public mandated pension schemes, the government needs to, at a minimum, tackle the increasing deficit in the civil service pension and improve the management of the retirement allowances and the NPS. This would represent an incremental approach to the needed reform. A more comprehensive approach would involve revamping the whole public pension system in a way that the major issues highlighted fin the previous section could be solved. There are several options within such a comprehensive approach.

30. The recent report of the task force on pension reform has outlined the following directions for reforms:

  • Establish a multi-pillar pension system consisting of a mandatory public basic pension and a mandatory private pension, supplemented by a voluntary private pension.

  • Introduce a defined contribution scheme.

  • Convert the RAS into a corporate pension, a defined contribution scheme.

  • Increase portability among different pension schemes and strengthen fund management and supervision of pension schemes.

  • Combine the public occupational pensions into the multi-pillar system.

31. The report proposes four options for reform along these lines. Consistent with best practice, a common feature of these options is a multi-pillar system. Table V.1 provides a summary of the four options.

Table V.1.

Options for Pension Reform

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An incremental approach

32. Option 1 proposed by the task force represents an incremental approach. Three partial reforms could bring significant benefits to the public pension system. The first involves improving the regulatory framework for the retirement allowances scheme so that workers’ rights can be protected, and also converting the RAS into a corporate pension gradually. The second involves improving the management of the NPS scheme. And the third involves reducing the benefits of the government employee pension at least to the level comparable to that under the NPS so that the scheme’s deficit can be contained.

  • Converting retirement allowances into a private corporate pension. The contribution would range between 3 and 8.3 percent, and the remaining part would be either converted to a voluntary corporate pension or a lump sum retirement compensation. In addition, pension portability would be introduced to facilitate labor mobility.

  • Improving the management of the NPS. Changes would include introducing a formula to ensure that the retirement age is actuarially fair; granting a contribution period credit to the unemployed, poor, students, and military personnel; and adjusting the contribution rate gradually to about 15 percent to postpone a deficit until 2080.

  • Reforming the government employee pension scheme. A critical objective is to control the ballooning of the cash flow deficit in the system. Options are to gradually reduce the benefits by raising the retirement age, eliminating the implicit work tax, shifting from wage indexation to price indexation, and using lifetime average earnings instead of final salary in the pension formula. The benefit would be lowered to comparable levels with other pensions, e.g., the NPS plus RAS.

A comprehensive approach

33. The other three options proposed by the task force involve a core pension system with broad coverage as the first pillar, a mandatory private pension as the second pillar, and a voluntary individual private pension as the third pillar. However, important differences emerge as to the choice of the core pension system and the design of the second pillar pension. Nevertheless, the transition from the current mixture of partially-funded and unfunded schemes to the multi-pillar system would be a leap forward.

34. Under Option 2, the NPS would become the core scheme for everyone with a lower replacement rate between 45 and 50 percent for 40 years of contribution. The RAS would be converted to a mandatory corporate pension for employees, to operate as a defined contribution scheme with a contribution rate of 6 percent and a target replacement rate of 23 percent. A new corporate pension to be licensed by the state would provide comparable second pillar protection for the self-employed on a voluntary basis. The public occupational pension schemes would be split into two parts: one part would be merged into the NPS while the remaining would be converted into a new occupational pension scheme that has the same targeted replacement ratio as the corporate pension. The new occupational pension would be a national defined-contribution scheme funded solely by a 6 percent contribution from the government.

35. Under the new multi-pillar system, the contribution rate under the NPS would need to be raised gradually to about 15 percent to ensure long-term financial viability. The targeted combined replacement rate for NPS and the second pillar pension would be about 70 percent. The contribution period credit and premium discount would be given to the low-income earners and the underprivileged for the first pillar pension (see Figure V.3).

Figure V.3.
Figure V.3.

The NPS Financial Projection

(Increase contribution to 15.24%)

Citation: IMF Staff Country Reports 2001, 101; 10.5089/9781451822052.002.A005

36. Under option 3, a universal basic pension for everyone over 18 years and older would become the first pillar pension. The basic pension would be operated as a PAYG scheme with a target replacement ratio of 20 percent. The break-even contribution rate for the basic pension would steadily increase from about 2 percent in 2001 to 8½ percent in 2040, then level off at 1O½ percent after 2050.

37. The earnings related portion of the NPS would be converted into a National Pension for employees. The National Pension would be operated as a fully funded scheme with a contribution rate of 6 percent and a replacement ratio of 20 percent. However, this contribution level may prove insufficient in the long term as a small cash flow deficit will occur after 2075 (see Figure V.4). The public occupational pension again would be split into two parts: the basic pension and the new defined benefit public occupational pension. The new public occupational pension would pay the difference between the original benefit before reform and that of the basic pension. The contribution rate for the public occupational pension would be raised to 21 percent to maintain financial viability. The conversion of the RAS to a corporate pension would be left to the discretion of each individual company while the management of the fund by outside financial institutions would be strongly encouraged with tax incentives.

Figure V.4.
Figure V.4.

The National Pension Scheme Financial Projection

(Decrease contribution to 6%)

Citation: IMF Staff Country Reports 2001, 101; 10.5089/9781451822052.002.A005

38. Under option 4, the NPS would be transformed into a first pillar basic pension

with a replacement rate of about 35 percent and a strengthened intergeneration redistribution function. The contribution rate would be capped at 10 percent and any additional contribution requirements would be borne by the government. The financial projection shows that financial sustainability in the first pillar would be secured when the contribution rate is gradually increased from current 9 percent to 12.1 percent in 2035 (see Figure V.5).

Figure V.5.
Figure V.5.

The NPS Financial Projection

(Increase contribution rate to 12.12%)

Citation: IMF Staff Country Reports 2001, 101; 10.5089/9781451822052.002.A005

39. The RAS would be converted to a mandatory corporate pension scheme (second pillar) with expanded coverage to all firms and temporary workers. The contribution rate would be 8.33 percent, the same as under the current RAS, but could go up to a maximum of 16 percent. The corporate pension would operate as a fully-funded scheme with professional fund management. The public occupational pensions would be split into two parts: basic pension (first pillar) and the earnings related pension that corresponds to corporate pension for employees (second pillar). The earnings related occupational pension would have the same contribution rate of 8.33 percent paid by the government and the same level of replacement rate. As under option 2, the government would license a new corporate pension to provide second pillar pension for the self-employed and farmers who are excluded from the mandatory corporate pension, which will offer similar benefits and enjoy comparable tax concessions. This comprehensive reform involves several detailed steps to create incentives for current employees to switch to the new system, although a tradeoff would arise in terms of fast transition and larger deficit in the government employee pension scheme.

40. Any of the four options would be an improvement relative to the current system, but they have different policy implications:

  • Although option 1 may receive the most favorable reaction from the public as it maintains the main features of the present framework, it does not offer a fundamental solution to the financial problems and imposes a very high economic burden on future generations.

  • Option 2 would be a step forward from option 1 by setting up a multi-pillar pension system with harmonized public and private pension schemes and earnings related pensions. The ambitious target replacement rate, however, could create problems for the financial viability of the scheme.

  • Option 3 offers a universal coverage basic pension to everyone over 18 years of age and serves an important function in preventing poverty in elderly poor. The proposed PAYG scheme for the basic pension may, however, be financially unsustainable, and the discretion allowed for converting the RAS to a mandatory corporate pension would essentially leave the RAS at its current unfunded and unregulated status.

  • Finally, option 4 appears to be the most comprehensive reform proposal. It aims to set up the multi-pillar system with a basic pension for everyone that is converted from the NPS, and it also offers three earnings related schemes for the second pillar pension. More importantly, with lower target benefit levels and less demand on future generations, it is more financially sustainable. Nevertheless, this option may impose a higher burden on the government due to its capped contribution on the basic pension and the high contribution from the government for the earnings related occupational scheme.

E. Conclusions

41. The pension system in Korea needs to be reformed. The system is presently at an early stage of maturity and accumulated pension liabilities are still manageable. This allows room for maneuver and more flexibility to take critical decisions. A delay in implementing needed reforms, however, could place Korea in a much more difficult position.

42. Successful pension reform requires careful planning, a supportive public, and a cooperative political environment. It will be important for the government to educate the public about the status of the current pension system and the need for immediate actions. The options outlined by the Pension Reform Task Force provides a good basis for a public debate on the key issues and should be helpful in reaching a national consensus. The preferred reform should be the one that delivers the maximum long-term benefit with acceptable short-term transition costs.

References

  • Asian Development Bank, The Pension System in Korea, 1999.

  • Gruber, Jonathon and David A. Wise, Different Approaches to Pension Reform from an Economic Point of View,” prepared for the NBER-Kiel Institute conference on Coping with the Pension Crisis—Where Does Europe Stand?, March 2000.

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  • Pension Reform Task Force, Basic Plan for Pension System Reform in Korea (draft), 2000.

  • OECD, 1999-2000 Annual Survey-Korea, 2000.

  • World Bank, Pension Reform in Korea, Report No. 20404-KO, May 2000.

1

This chapter was prepared by Qingying Kong.

4

In view of similarities in benefit structure and financing, the rest of the analysis will focus only on the civil service pension scheme.

5

The fund is financed in part by a 0.2 percent wage tax.

6

The NPS’s assets are managed by a government agency that is subject to the influence of the Ministry of Finance and Economy and the Ministry of Health and Welfare.

Republic of Korea: Selected Issues
Author: International Monetary Fund