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As the gap between the mandatory retirement age for civil servants and the age at which they begin receiving pension payments continues to widen, the so-called "income cliff" — a period of up to five years without any pension income after leaving work — is becoming a reality. More than nine in 10 active civil servants expect to face such a gap, and about half of those who have already experienced it said their monthly essential living expenses fell short by 2 million won ($1,490) or more.
According to relevant legislation and materials from a National Assembly forum, the statutory retirement age for general civil servants is 60, while the age at which civil servant pension payments begin is being raised in stages to 65. A 2015 pension reform delayed the start of pension payments but left the retirement age unchanged, creating a structural gap between the two.
In practice, 1,697 national civil servants who retired at the mandatory age last year were unable to receive pension payments immediately after leaving their posts. The figure was disclosed by Democratic Party of Korea lawmaker Lee Yong-woo at a National Assembly forum on civil servant pension income gaps and retirement age extension held Tuesday.
According to the Public Official Pension Service, civil servants appointed after 1996 face a staggered pension eligibility age depending on when they retire. Those retiring between 2024 and 2026 can begin collecting pension at 62, while those retiring between 2027 and 2029 must wait until 63, and those retiring between 2030 and 2032 until 64. From 2033 onward, the eligibility age rises to 65.
For a general civil servant who retires at the mandatory age of 60, the gap before pension payments begin currently stands at about two years, but will grow to three years starting next year and reach up to five years for those retiring in 2033 or later. Elementary, middle and high school teachers have a retirement age of 62 rather than 60, but face the same problem of a delayed pension start.
The widening structural gap is fueling anxiety among those still in service. A policy research survey presented by Chae Jun-ho, a business administration professor at Jeonbuk National University, at Tuesday's forum found that 91.9 percent of 2,657 active civil servants surveyed expected to face a pension income gap after retiring.
Particularly striking, 66.8 percent of those who anticipated a gap said their household's average monthly income after retirement would fall short of essential living expenses by 2 million won or more. The survey was conducted from Aug. 13 to Sept. 30 and covered 2,657 active civil servants and 158 retired civil servants.
Among the retired civil servants surveyed, the financial strain was already evident. Of the 158 respondents, 24.1 percent said they were currently experiencing a pension income gap, while 15.8 percent said they had previously gone at least a month without pension income — meaning nearly 40 percent of all retired respondents had lived through a period with no pension payments.
Of those 63 individuals, 50.8 percent said their average monthly household income during the gap period fell short of essential living expenses by 2 million won or more. Some 60.3 percent said they had drawn on their retirement allowance to cover living costs and spent it faster than originally planned.
Finding work after retirement also proved difficult. Among all retired civil servant respondents, 36.7 percent said they had no income-generating activity whatsoever after leaving their posts, and only 16.5 percent had participated in a public-sector reemployment program.
Professor Chae said linking the retirement age to the pension eligibility age is the central challenge for securing income in old age. Because the retirement allowance is a finite lump sum, it cannot bridge a prolonged income gap, and a system that provides stable income before pension payments begin is needed, he said.
Extending the retirement age was the most preferred solution among civil servants for closing the income gap. In the survey, 58.6 percent of active civil servants and 48.7 percent of retired civil servants ranked a statutory retirement age extension as the top policy priority — the highest share in both groups.
The fiscal burden, however, is substantial. Professor Chae's research examined options including a phased extension of the retirement age to 65 for both general civil servants and teachers, and estimated that additional annual personnel costs would range from 3.76 trillion won to 6.03 trillion won depending on wage adjustment methods and reemployment arrangements. The required funding varied significantly based on whether a wage-peak system was introduced and how deeply salaries were cut.
The potential reduction in new hiring and promotion opportunities as the workforce ages is another concern. Professor Chae proposed channeling a portion of the wages of those who benefit from the extended retirement age into a fund for hiring younger workers. Setting aside 3 percent of their salaries into a separate fund could, once the system matures, generate enough resources to hire roughly 2,439 to 4,107 Grade-9 general civil servants annually, the research found.
International experience highlighted the importance of wage structure design. Japan has been gradually raising the retirement age for national civil servants from 60 to 65, reducing basic salaries in principle to 70 percent of their previous level after age 60. Kim Yeong-geon, a member of the wage and pension division at the Korean Government Employees' Union Federation's policy research institute, who examined the Japanese case, said civil servants there have expressed frustration at having their pay cut while retaining the same duties and responsibilities.
"If the retirement age is extended while wages are sharply reduced, the income gap may simply be replaced by a period of low income," Kim said. The compensation structure should be designed to reflect the actual duties, responsibilities and working hours assigned after the retirement age extension, Kim added.
The fact that extending the retirement age alone cannot resolve the income gap for those who have already retired was also raised as a concern. Park Jung-bae, first vice chairman of the Korean Government Employees' Union, said choosing an early pension could result in a permanent reduction of up to 25 percent, and called for transitional measures for civil servants who retire before any retirement age extension legislation takes effect.
The forum also put forward a range of other proposals, including rehiring retirees, providing temporary income support, and reforming the early pension reduction system. Participants said the government must comprehensively adjust staffing needs, headcounts and budgets by job category to guarantee employment opportunities for older civil servants while maintaining the scale of youth hiring.
People Power Party lawmaker Lee Dal-hee, who co-hosted the forum, said extending the retirement age requires weighing fiscal burdens, promotion bottlenecks, youth hiring and intergenerational equity together. Democratic Party lawmaker Lee Yong-woo said the government should develop the income-gap remedies discussed during the 2015 pension reform and pursue legislative discussions linking the retirement age and pension issues.
rainbow@heraldcorp.com
