President Park Geun-hye’s ambitious drive to expand welfare benefits to the elderly was forced to retreat on Wednesday in the face of budgetary pressure. 

An advisory panel assigned to seek consensus on the new plan said it had agreed to cut the scale of the pension scheme substantially from the campaign pledges Park made late last year.

Wrapping up its four-month discussion, the panel said it would exclude the richest 20 to 30 percent of elderly citizens, scrapping Park’s original plan to offer benefits to all Korean nationals aged 65 and over.

The “Basic Pension” will be funded by taxpayers’ money, not the accumulated funds currently managed by the National Pension Service. The amount given, up to 200,000 won a month, will vary according to recipients’ incomes. The new pension program for the elderly will start operating in July 2014, the panel added.

The Ministry of Health and Welfare aims to draft a final plan based on the agreement next month and submit the bill to the National Assembly in September.

The pension scheme was scaled down considering the lack of income sources and the need to keep the system sustainable.

“The committee planned to launch a sustainable basic pension system that could relieve elderly citizens from poverty as soon as possible to an extent that it wouldn’t become a severe (financial) burden on the next generation,” said Kim Sang-kyun, chairman of the 13-member committee.

The chairman said the government’s financial status has been deteriorating rapidly over the last six months and it was hard to push ahead with the original plan, as it would pass on a huge financial burden to future generations.

“Things are different now to when it was suggested as a campaign pledge (six months ago). The basic pension will be wholly dependent on tax revenue. The incumbent government has already allocated additional budget but still substantially lacks (budget income). Concerns have risen that the basic pension scheme could hurt the nation’s economic growth,” Kim said during a press conference.

During the election, Park pledged to offer a monthly pension of 200,000 won to all elderly citizens aged 65 and over, regardless of their income level. As a growing number of people started to question the plan’s feasibility, the presidential transition committee came up with a revised plan.

The transition team suggested the government vary the pension between 40,000 won and 200,000 won according to income level, while keeping the benefit target unchanged ― all elderly citizens aged 65 and over.

The scaled-down pension scheme, however, is seen as Park’s welfare policy in retreat, experts said.

“It will be difficult for the Park administration to ward off criticism from the people (who voted for her and her welfare pledges),” said Yun Suk-myung, director of the Center for Pension Research at the Korea Institute for Health and Social Affairs.

But the director stressed that the panel had made a substantial and realistic measure.

With the transition committee’s plan, the government is projected to spend 8 trillion won-9 trillion won in 2015 alone and 12 trillion won in 2017, when Park’s presidential tenure ends.

Such a plan would impose an even bigger financial burden on later generations, considering the nation’s fast-growing aging population, he said.

By 2060, when the country is expected to have 17 million people aged 65 and over, the government’s financial burden regarding the basic pension scheme will multiply at least eightfold, Yun said, quoting data from Korea Development Institute and his own research.

The new pension plan was initially pushed ahead by the Park administration to save elderly citizens left in extreme poverty and unprepared for retirement. According to a recent report, Korea’s poverty rate among elderly citizens aged 65 and over has reached 45 percent, placing the country at the bottom of the OECD in terms of quality of life for senior citizens.

By Cho Chung-un (christory@heraldcorp.com)