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Overview

The Government Employees Pension System (GEPS) was introduced in 1960 as the first public pension system in Korea. The Military Personnel Pension System was separated from the GEPS in 1963, while the Private School Teachers Pension System and the National Pension System was established in 1975 and 1988 respectively. The aim of the GEPS is to guarantee social protection for civil servants and their survivors by providing comprehensive benefits such as retirement (old-age), survivors and disability pensions or lumpsum payments. The GEPS is also a special pension system that reflects the career-based system characteristic of the Korean civil service. The GEPS has thus played a significant role in Government policy related to personnel management by making public service attractive to potential and new employees and incentivized existing employees, thus improving retention against opportunities in the private sector.

Coverage and Contributions

The GEPS is a unique civil service pension program in Korea as it includes all civil servants who are employed both in central and in local governments such as public school teachers, police officers, fire fighters, judges, and prosecutors as well as general civil servants. The only group excluded from the GEPS are civil servants appointed by election.
As of the end of 2017, the number of the participants of the GEPS was 1,599,852 in total with 1,120,458 active employees in service and 479,394 pensioners (including 14,724 deferred members). Current estimations suggest the rate of pension expenditures as a share of GDP will increase continuously until the late 2040s. The growing number of pensioners is attributed to the increasing life expectancy in Korea.

Past Flow of Government Employees and Pensioners
For information on this graph, please contact the question board.

The GEPS provides both contributory benefits and noncontributory benefits. Contributory benefits such as retirement pension and survivors’ pension are disbursed from contributions of both the government and government employees. The contribution rates in 2016 were at 16.0% and, by 2020, this is set to increase to 18.0% (9% of Government and 9% of GEs). Since 2001, contributory benefits have partly relied on subsidies by the government to the amount of any annual deficit. Noncontributory benefits on the other hand, such as Disability Benefits and Retirement Allowance are allocated from the central and local government budget.

Benefits

The benefits of the GEPS are broadly divided into two types: short-term benefits and long-term benefits. Short-term benefits are prepared for short-term insured accidents and long-term benefits for income security after retirement. The short-term benefits consist of Medical Treatment Payment, Disaster Condolence Payment, and Death Condolence Payment. The long-term benefits include Retirement Benefits, Disability Benefits, Survivor’s Benefits and Retirement Allowance.

As the main benefit of the GEPS, the Retirement Pension Benefit requires the claimant to be at least 60 years of age with at least 10 years of contributions. The retirement age will be extended to 65 years in 2033. Retirees can choose the Lump-sum Payment or the Deducted Lump-sum Payment instead of a monthly pension. A retiree whose service term is less than 10 years can take the Lump-sum Refund, which is a refund of contributions with interest. That said, if the retiree joins the National Pension System again while working in the private sector and the total term of contributions is over 20 years in both pension systems, he/she is entitled to the Combined Pension System. Under this system, retirees are eligible to receive monthly pensions from each public pension system instead of a lump-sum payment. The amount of Retirement Pension per recipient is determined by the recipients’ average career salary and the period of contributions. In 2016, the accrual rate of the pension was 1.878%, however, the government plans to reduce this figure gradually to 1.7% by 2035. The maximum term of contributions and calculation of pension benefits is 36 years. Given these conditions, the replacement rate of the Retirement Pension is calculated based on the average of the retirees revalued career salary. The final compensation will, therefore, range anywhere between 17% (for 10 years in service) to 61.2% (for over 36 years in service). Pension benefits are currently adjusted annually in line with the consumer’s price index. However, the amount of pension benefits is temporarily frozen until 2020 without the CPI indexation.

Regardless of the length of service, the Disability Benefits are paid to retirees who have partially or totally lost any part of their body or have suffered physical injury or mental illness while on duty. The amount of the Disability Pension depends on the degree of disability, which ranges between 52% (Grade 1) of the final salary to 9.75% (Grade 14). In the event a government employee dies due to illness or injury while working, the Death-on-duty Pension is paid to their surviving dependents. The amount of the Death-on-duty Pension varies depending on the number of years in service. For deceased retirees who have served over 20 years, compensation is 32.5% of the final salary of the deceased whereas those who have given under 20 years receive 26% of the final salary. The Death-on-duty Compensation which is also paid in a lump-sum is equivalent to 23.4 times that of the final salary. Retirees who suffer accidents or injuries unrelated to their duties still receive Disability Benefits receive 50% of the benefits.

For cases where the deceased was receiving a retirement or disability pension at the time of death, surviving dependents receive Survivors’ Benefits. Dependents who qualify for Survivors’ benefits receive remuneration equal to 60% of the basic pension.

The Retirement Allowance (RA) is an additional lump-sum payment added to the basic retirement benefits. Government employees who have served for more than one year before retirement qualify for RA. The amount of the RA multiplies the final salary by the ratio for each year in service. The ratio varies from the service years, which ranges from 6.5% (1~5 years) to 39% (over 20 years).