President Lee digs into foreign nationals’ pensions

Shin Sung-sik

The author is a welfare specialist reporter at the JoongAng Ilbo.

President Lee Jae Myung’s "politics of detail" continues. Rather than grand themes, he focuses on issues close to everyday life, particularly in health and welfare, where programs are intricate. They include health insurance coverage for hair-loss treatment, free sanitary pads, the abortion pill Mifegyne and automatic payment of welfare benefits. Most recently, he has zeroed in on pensions for foreign nationals.

The issues involve retroactive National Pension contributions and foreign recipients of the basic pension. They are hardly sweeping reforms. The details are obscure enough to prompt the question: How does the president even know about them?

Lee first raised retroactive contributions at an Aug. 25 Cabinet meeting, calling it “contradictory” that foreigners residing briefly in Korea could qualify. At Cabinet on Sept. 1, he raised reciprocity, saying Korea need not provide benefits unavailable to Koreans elsewhere. He returned to the subject at a Thursday  meeting with senior aides — three times in nine days.

The case Lee described involves a foreign national who pays one month of premiums while working in Korea, leaves the country, then returns and retroactively pays 119 months, the maximum allowed.

The government conducted a comprehensive review. It found three foreigners who had paid one month and later contributed for 119 months retroactively. One was married to a Korean, and two were overseas Koreans. All three lived in Korea throughout those 119 months and still do. Only one currently receives a pension.

A broader review found another overseas Korean had spent three months abroad during the retroactive contribution period and another two months. They lived in Korea for the remainder.

In other words, investigators found no case matching the scenario Lee described.

Many Koreans also use the one-month-plus-119-month arrangement, including homemakers and low-income workers who failed to prepare adequately for retirement. Some may have been abroad during the relevant period, but that does not affect eligibility.

After Lee raised the issue, the Ministry of Health and Welfare revised its guidelines on Aug. 31 to require verification of actual residence for foreign nationals making retroactive contributions.

Most countries operating public pension systems allow such payments to fill contribution gaps caused by education, marriage or child care. Korea permits them more broadly, including for periods when economic difficulties such as unemployment or business failure prevented contributions.

The system is not designed to favor or disadvantage foreigners, including any particular nationality. Nor is it comparable to health insurance, under which parents of foreign workers can become dependents after living in Korea for six months without paying separate premiums.

Retroactive pension contributions require payment of previously unpaid premiums.

National Pension Service Chairman Kim Sung-joo wrote on Facebook that if foreigners have lived in Korea long term, enrolled in the National Pension and paid the same premiums as Koreans, denying retroactive contributions based simply on nationality would be controversial. No particular country should be excluded, he said.

Kim noted that Korean nurses and miners formerly dispatched to Germany, including some now living in German Village in Namhae, receive German pensions while residing in Korea.

Oh Geon-ho, co-chair of My Welfare State, said any flaw in retroactive contributions for foreigners would equally apply to Koreans using the system. By portraying it as though foreigners alone were exploiting a loophole, he said, the president risks deepening distrust of the National Pension.

At the end of last year, 486,458 of the National Pension’s 21.81 million subscribers, or 2.2 percent, were foreign nationals, 1.9 times the number a decade earlier.

Chinese nationals were the largest group at 195,444, or 40.1 percent, followed by Mongolians at 58,664 and Indonesians at 33,828. Filipinos, Thais, Sri Lankans, Vietnamese and Uzbeks followed.

Last year, 1,517 foreigners made retroactive contributions, just 0.31 percent of foreign subscribers. Chinese nationals accounted for 83.1 percent, including ethnic Koreans from China at 76.3 percent, according to data obtained by Rep. Kim Kyo-heung. Americans accounted for 7.2 percent, Canadians 4 percent and Japanese 2.5 percent.

On Thursday, Lee also ordered changes concerning foreigners receiving the basic pension. Strictly speaking, the issue involves dual nationals.

Someone who lived abroad after marrying a foreigner, for example, may regain Korean nationality upon returning and become a dual citizen. Those aged 65 or older who meet income and asset requirements can receive the basic pension. Their foreign spouses can also receive it for two years. No minimum period of residence applies to dual nationals. Some 7,000 to 8,000 currently receive the pension.

Australia and Canada require 10 years of residence, Norway five and Sweden three. The Netherlands provides full benefits after 50 years of residence, reducing payments proportionately for shorter periods. Such requirements reflect the principle that recipients should have contributed through taxes.

Here, Lee correctly identified a loophole in the basic pension.

Yet he did not address the collapse of plans to restructure the basic pension so that lower-income seniors receive more, nor what comes next.

There is also criticism of his policymaking approach.

“The president is raising peripheral issues,” Oh said. “Focusing on narrow problems risks stirring hostility toward foreigners. I hope he will instead act as someone who identifies central issues and guides them in a productive direction.”