Pension Systems for Public Sector Employees in the Republic of Korea

On December 31, 2009, the Government Employees Pension System (GEPS) in the Republic of Korea was faced with a huge pension reform. The objective of the reform was to lessen the financial burden in the future. This paper tries to provide a comprehensive understanding on the 2009 reform, rationalizing on the resulting effects, its limitation and tasks ahead. Initially, upon the preliminary comments on the structure of public pension system in Korea, the paper presents the history and design features of the pension schemes for public sector employees. Second, it provides detailed aspects of the reform such as key issues, reform process and resulting pension structure. Then, as a primary concern, it examines the effects of the 2009 reform from two different perspectives; financial evaluation in macro perspective and individual equity evaluation in micro perspective. Finally, we will try to evaluate the 2009 reform of the GEPS as a whole, and then to address its limitation and tasks ahead. We show that, while the 2009 reform could consolidate the financial status for the scheme by and large, the GEPS will inevitably face various challenges ahead. The implication is that future path of the reform should be chosen in a fashion that both macro-financial aspect and micro-equity aspect are equally well considered.