Expanding coverage of the National Pension in Korea: the effectiveness of the matching contribution subsidy

Hyungpyo Moon examines the compliance behavior in the National Pension system in Korea and evaluates the effectiveness of the matching contribution subsidy in expanding coverage. The author begins with a brief history of the system and its pitfalls. In 1988 the Korean government introduced the National Pension Scheme, but with limited coverage. According to data from the National Pension Corporation for the year 2009, a total of 18.6 million people were insured under the system. Slightly more than half were insured through their place of work and the others were insured as individuals. However, well over half of the individually insured were given exemptions or deferrals from making contributions. In Korea, workers are entitled by law to be insured through their place of work. But employers in smaller companies often are either unable or unwilling to pay the employer’s contribution to the scheme, leaving the workers uninsured. Such workers may join the scheme as individuals, but many of them choose to remain excluded from the system, either because they do not want to pay the premium or because of the burden it would place on an already low level of income.