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asking where the sources of funding for all her election pledges have gone. While campaigning for president

By Lee You-jin, staff reporter

Starting in July 2014, one in two people over the age of 65 will receive a monthly pension of 200,000 won (US$183.70). But plans for a basic pension, one of the key planks in President-elect Park Geun-hye’s campaign platform, looks to be in for a major overhaul before she even takes office.

On Feb. 21, Park’s presidential transition committee released a detailed outline of the new administration’s policy tasks that included changes to the pension system that would provide citizens over 65 with a basic pension between 40,000 won (US$36.70) and 200,000 won.

Under the plan, the national pension and basic old age pension would be combined into a “citizens’ happiness pension.” The basic old age pension, which is currently paid to the bottom 70% of earners over 65, would rise from 96,000 won (US$82.70) a month to 200,000 won in the new form of the “basic pension.”

But three million national pension subscribers - roughly half the country’s six million people over 65 - would not be eligible. Instead, their pension amounts would vary according to the length of their pension enrollment. The longer they contributed to the pension plan, the more they would get back.

Among the bottom 70% of people over 65, the 3.17 million who are not enrolled in the national pension would receive 200,000 won a month, while the 1.01 million who are enrolled would get between 140,000 won (US$128.60) and 200,000 won.

As for the top 30%, the 790,000 national pension enrollees would receive 40,000-100,000 won (US$36-92), and the 1.01 million non-enrollees would receive about 40,000 won.

The most positive result is a doubling of the amount of cash support to poor senior citizens who are not currently receiving national pensions. This marks a big change from the outgoing Lee Myung-bak administration, which tried throughout its term to cut the number of beneficiaries to give more money to the most impoverished elderly.

But Park also stands to face heavy criticisms for making major changes to a pledge she made throughout her campaign. As a candidate, her platform said that she would increase benefits to “above twice their current levels (10% of price-indexed average monthly income for the three years prior to receiving a pension) for all senior citizens over 65 and the severely disabled with the immediate introduction of a basic pension.” With national pension subscribers now receiving less than expected compared to those who aren’t receiving anything, the President-elect is already being accused of unfairness.

As of August 2012, the average enrollment period for new national pension beneficiaries was 15 years and seven months. According to the new plan, the lowest-earning 70% of senior citizens would receive a monthly basic pension of around 150,000 won (US$137.70), while those not enrolled in the national pension system would get 200,000 won.

The difference has to do with reductions of up to 3% in the price-indexed average monthly income for all national pension subscribers according to enrollment period, with the 200,000 won in benefits representing the amount for 40 years of enrollment. This is a last-ditch measure to reduce the drain on finances and increase the incentive for enrollment. The cost given in the election platform was 14.7 trillion won (US$13.5 billion) during Park’s term, but experts estimate it would actually cost about 9 trillion won (US$8.27 billion) each year. The transition committee has said that all basic pension monies would come from national coffers.

Under the current system, young people in particular stand to receive less in pension benefits than promised. At the moment, the lowest-earning 70% of senior citizens can also receive a national pension or basic old age pension. Under the transition committee’s plan, however, those with shorter enrollment periods would end up receiving lower benefits that under the current basic old age pension. The victims, in the short and long term, are low earners with short national pension enrollment periods.

The current system would allow people to receive the basic old age pension as of 2028, when it turns into 10% of price-indexed average monthly income. But the transition committee’s plan involves reducing the basic pension from 10% of price-indexed average monthly income according to enrollment period.

Kim Yeon-myung, a professor in the Chung-Ang University department of social welfare, said the biggest problem with the committee’s plan is that it would not honor Park’s pledge for the basic pension.

“It would be worse that the current system where people can receive both a basic old age pension and a national pension at the same time,” Kim said. “So it would hurt younger people, and it’s structured to give more to long-term subscribers.”

“It’s actually becoming more unfair,” Kim added.

A source in the transition committee explained that the drain on taxpayer money was much higher when both national pension and basic pension benefits were paid.

“Integrating them now is a way of preventing a tax problem in 2028, when the national pension reaches maturity,” the source said.

“It’s a system to reduce the burden on the next generation, who will have to pay more in taxes to support the elderly.”

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