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Retirement pensions in South Korea to be mandatory

Staff writer |
South Korea's Finance Ministry said all companies will be obliged to introduce retirement pension schemes for employees by 2022 to complement public pensions and raise the income replacement rate for retirees.

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Companies with more than 300 regular workers will be subject to adopting the private pension plan, which forces businesses to trust money with outside financial institutions for retirement pensions, from January 1, 2016, according to the Ministry of Strategy and Finance. The coverage will be widened to firms with less than 10 workers by 2022 in a gradual manner.

Finance Minister Choi Kyung-hwan told reporters that it needs to strengthen public pensions such as the national pension plan, while expanding private pensions such as the retirement pension and individual pension schemes.

Small-sized businesses with less than 30 workers, who earn less than 1.4 million won (1,380 U.S. dollars) a month, will be supported by the government with a financial aid for company contributions to the retirement plan.

The move came as the country's three-tier pension structure, including public, retirement and individual pensions, may not be enough to support retired workers financially at the fastest-aging country with a lower birth rate.

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