Fiscal implications of the 2015 government employees pension reform in Korea

Using an actuarial model of the Government Employees Pension System (GEPS), this study quantifies the fiscal impacts of the 2015 GEPS reform in Korea, which gradually raised the contribution rate as well as the pensionable age, while reducing the accrual rate for benefits. It projects that the 2015 reform will substantially decrease the deficits over the next 70 years, but the overall fiscal burden due to the GEPS, which includes subsidies for closing the deficits, retirement allowances, and government’s matching contributions, will remain substantial over the same projection period. The analysis on the marginal impact of individual measures in the reform package reveals that about a third of the reduced pre-reform deficits (hence government subsidies) are simply replaced by the increased government matching contributions after the reform, leaving a considerable annual fiscal burden sizeable even after the reform.