A critical review of the 2015 South Korean civil service pension reform

Abstract

The Republic of Korea’s civil service pension (KCSP) was established in 1960 and has been changed several times to overcome the serious financial burdens it has placed on the country. Major problems related to the KCSP include its structure (low contribution and high benefit) and the country’s rapidly aging population. The authors examine the 2015 KCSP reform, reviewing the reasons for the reform, its process, and its fiscal and policy implications. Reforms in other countries are briefly compared. The paper provides important lessons for researchers and practitioners involved in public sector pension reforms. IMPACT: The Republic of Korea's civil service pension reform was urgently needed to reduce the financial burden on the nation. Accordingly, in December 2014, a ‘Special Committee for the Civil Service Pension Reform’ was established, composed of members from ruling and opposition parties and a ‘Body for a Societal Grand Compromise on Civil Service Pension Reform’, with the aim of resolving conflicts through discussion between the main stakeholders, including public officials, experts, civil society, and civil service unions. The Korean government found it very difficult to reach an agreement on the pension reform plan, because contributors would be paying more, receiving less, and receiving later. Nevertheless, following lengthy discussion involving intensive dialogue with social partners, policy actors arrived at a social consensus through a deliberative process.