Key Terms in the 2025 National Pension Reform Plan

In 2025, the ruling and opposition parties agreed on a National Pension reform plan.
For those unfamiliar with the terms, here is a simple explanation.

< Glossary >
Parametric reform: A reform that keeps the basic framework of the pension system intact and changes only the numbers.
This reform adjusted two 'numbers': the contribution rate and the income replacement rate.
Income replacement rate: The ratio of the pension amount to the average income earned while working.
For example, if the income replacement rate is 43%, a person who earned a monthly salary of 1,000,000 won throughout their life would receive 430,000 won as a pension.
Credits: It is easiest to think of them as a 'free pension enrollment period'.
In certain situations (childbirth, military service, etc.), this system recognizes the time as an enrollment period even if no contributions were actually paid.
Fund depletion: The point at which the money in the National Pension account runs out completely.
Under the current plan, the money was set to run out in 2056, but this reform has extended it to 2071.
Required contribution rate: The contribution rate needed to cover the amount paid to that year's pension recipients solely with the contributions of people working that year.
For example, if the required contribution rate is 36.6%, it means that only 9% is currently being paid, and the rest is being drawn from the fund.
Balanced contribution rate: The contribution rate needed to sustain the pension system over the long term.
It is similar to the salary needed to balance income and expenses in a household budget.
Workplace-based subscribers: Employees who work at a company. They pay half of the contribution themselves, and the company pays the other half.
For example, if the contribution is 180,000 won, the employee pays 90,000 won and the company pays 90,000 won.
Individually insured subscribers: Self-employed people, freelancers, farmers and fishers, or people without a job. They pay the entire contribution themselves.
For example, if the contribution is 180,000 won, they pay the full 180,000 won on their own.