[Exclusive] National Pension overhaul of military service and childbirth credits to add 36 trillion won in spending... Total projected at 279 trillion won through 2093

Military service credits extended to full service period; second-child credit raised to 15 months
Projected costs to surge from 243 trillion won to 279 trillion won

The credit system, which artificially extends the period of National Pension Service coverage to increase the old-age pension benefits people receive after retirement, has been expanded and overhauled. As a result, pension spending is expected to rise by around 36 trillion won over the next 66 years. The policy has been justified as a way to reward military service and strengthen public pension entitlements to help address the low birth rate. However, critics say it adds to spending burdens without a clear plan to increase pension fund revenue, leaving future generations to foot the bill.

National Pension Service Happy Pension Hall. The Asia Business Daily DB.

According to the Ministry of Health and Welfare on October 8, if the amendment to the National Pension Act, which recently passed a plenary session of the National Assembly, takes effect as scheduled next year, total spending on military service and childbirth credits over the period covered by the fifth actuarial valuation (2023-2093) will rise from approximately 243 trillion won to around 279 trillion won. National Pension credits artificially add to a person's coverage period in recognition of socially valuable activities. The longer the coverage period, the higher the monthly old-age pension benefit a person receives upon reaching the eligible age.

Under the amendment, the military service credit will be expanded from the current maximum of 12 months to cover the entire period of service (18 months in the Army, 20 months in the Navy and 21 months in the Air Force). In addition, people who served for six months or less, including those discharged early for family reasons, who were previously ineligible for the credit, will receive credit for their actual service period. As a result, spending on military service credits is projected to increase by approximately 25 trillion won, from 79 trillion won to 104 trillion won. For the childbirth credit, the period credited for the birth of a second child will be extended by three months, from 12 months to 15 months, raising projected total spending by around 11 trillion won, from 164 trillion won to 175 trillion won.

The expanded system will increase the pension benefits received by eligible contributors. Based on the National Pension A-value, the average monthly income of all contributors over the past three years (3,193,511 won), and a 43% income replacement rate, the monthly pension increase from the military service credit for Army service (18 months) will rise from 25,740 won to 38,620 won. For the childbirth credit, the monthly pension increase for a second child will also rise from 34,330 won to 42,910 won.

The credit system was first introduced in 2008. At the time, it credited six months of military service, while the childbirth credit applied only from the birth of a second child onward (12 months for a second child and 18 months for a third child or any subsequent child). The system remained in place for 18 years before being revised this year to provide up to 12 months of credit for military service and 12 months for the birth of a first child as well. Now, its scope is being expanded again after just one year. While there is broad agreement with the policy rationale of providing social recognition for childbirth and military service, concerns are growing that, with pension depletion effectively a "certain future," the changes will increase spending without introducing meaningful measures to stabilize pension finances, shifting the burden onto future generations.

This content was produced with the assistance of AI translation services.