SEOUL, Aug 27 (Reuters) - South Korea said on Wednesday all local companies would be required to introduce a retirement pensions plan by 2022, a step aimed at helping fund an expected surge in welfare costs from a rapidly ageing population.
South Korean firms began voluntarily offering retirement pensions to replace the previous severance pay system in 2005, but only 15.6 percent of the 1.68 million eligible companies have adopted the pensions scheme as of June this year, government data shows.
Under mandatory rules announced jointly by the finance ministry and two other government agencies, the remaining 1.42 million companies will be required to introduce retirement pensions by the beginning of 2022.
South Korea has pulled itself out of poverty in just one generation through a state-guided industrialisation drive but its social safety net remains one of the weakest among the middle- to high-income economies.
Data provided by the finance ministry shows some 87.5 trillion won ($86.27 billion) of retirement pensions have been invested in financial assets as of June this year, with just 15.6 percent of the eligible companies adopting the new system.
The finance ministry said in a statement Wednesday’s plan would be implemented gradually, starting with companies employing more than 300 employees each that will be required to adopt the new pension system by the start of 2016.
South Korea’s near 50 million population is fast aging and the country’s low birth rate - one of the world’s lowest - means the burden on the economy of supporting the retirees is set to increase rapidly. (1 US dollar = 1,014.2000 Korean won) (Reporting by Choonsik Yoo; Editing by Shri Navaratnam)