Pension reform agreement stalled amid political tensions

The ruling and opposition parties have agreed on a pension reform bill that raises both the national pension insurance premium rate (contributions) and the income replacement rate (benefits). However, they remain locked in a political standoff without even scheduling the National Assembly's deliberation on the bill. The dispute centers on the operation of the National Assembly’s Pension Special Committee, which will address structural reforms separately from the pension reform bill. The People Power Party insists that the resolution forming the special committee must include a clause requiring "mutual agreement between the ruling and opposition parties" for any decisions. This is to prevent the Democratic Party of Korea from unilaterally passing measures in the committee. The main opposition party, however, argues that since the ruling party has already secured the chairmanship of the special committee, no explicit documentation is necessary to ensure bipartisan cooperation.

Just four days ago, the two parties reached a breakthrough agreement to raise the insurance premium rate to 13% and the income replacement rate to 43%. This agreement followed a year of stalled negotiations due to disagreements over a 1% difference in the income replacement rate. Yet, within two days of the agreement, new conflicts have cast doubt on whether the pension reform bill will proceed through the National Assembly. Meanwhile, the financial urgency remains—each day of delay increases pension-related debt by 88.5 billion won.

Premium and income replacement rate reform itself is only the first step. The more complex issue of structural reform remains for the Pension Special Committee to address. Key areas of contention include the "automatic adjustment mechanism," which would reduce benefits if pension funds become unsustainable. Without structural reform, the current bill would only delay the depletion of pension funds by eight years. However, addressing deeper structural changes—such as reforms to other pension programs beyond the national pension—is a long-term, complex process requiring significant time and negotiation.

Further delays could arise from the political fallout following the Constitutional Court’s impeachment trial of President Yoon Suk Yeol. Once the trial concludes, the "post-impeachment" political environment could overshadow all other legislative priorities, leaving the already fragile pension reform agreement to drift. With pension reform stalled for 18 years since the last major revision in 2007, this moment represents a critical opportunity. Failure to act now will place an enormous financial burden on younger generations and future citizens. It is imperative that the National Assembly swiftly completes the legislation before the impeachment trial concludes to secure the long-term sustainability of the pension system.