E3161 Victoria Edwards interviewed Mrs Kyung Ja Cho, a foreign researcher hosted by the Royal Military College of Canada.
e-Veritas: Outline your academic and career background.
Mrs. Kyung Ja Cho: I attended Korea University in Seoul, where I studied the Korean language and Korean literature. After passing the Senior Entrance Examination for Administrative Service, I had the opportunity to choose the Ministry of National Defence to work in. In the Ministry, I have experienced all aspects of organizational management, human resources management, and budget settlement. I also have experience with international arms control and policy management.
With such organizational skills, I was called to serve as a founding member of the National Human Rights Commission of Korea in 2002. I contributed to the establishment of human rights policy in Korea, and also served as an investigator of human rights abuse by the government, and discrimination in the private sector.
Before coming to Canada, I served as the Director of the Military Pension Management Division. The Division is working on a revision of the ‘Military Pension Act’, which we hope will lower the budget and at the same time contribute to attracting competitive candidates to the military. I was also responsible for the investment and management of the Military Pension Fund to the size of approximately $420 million.
I have been hosted by RMC for two years, conducting research on Canadian military pensions and the Canadian Pension Plan in order to compare them to my country’s pensions and draw improved policies. The current Canadian pension plans are more suited to a developed nation, and I am looking for ideas suitable for my country, which is still developing. My personal goals are to become a link between military experts in Canada and Korea, contribute to the military diplomacy between the two countries, and improve my English skills.
e-Veritas: Please comment on your Canadian experience.
Mrs. Kyung Ja Cho: I was accompanied to Kingston by my husband, who worked for the ROK government, and our two children. Our son (13) and daughter (11) both attend St. Thomas More Catholic School, where they are both picking up English skills like sponges. We live in an apartment, and are enjoying our life in Canada. We have found that the weather in Kingston can be milder than in Seoul. Last summer, we visited the Canadian Rockies, Victoria on Vancouver Island, Montreal, and Toronto. The highlight, for the children, was seeing brown bears, caribous, deer, and moose. My favourite part was touring the Royal Ontario Museum, because I am interested in history. My husband enjoyed touring the Royal Military College museum. And also, I thank Dr. E.J. Errington, Dean of Arts, who gave me many Canadian history books when she retired.
e-Veritas: I understand that following the enactment of the Framework Act on Military Personnel Welfare in March 2008, the Military Personnel Basic Plan was formulated in April 2009. The MND in ROK is striving to establish a higher quality of military welfare system for service members in order to improve morale. (Source http://www.mnd.go.kr/mndEng_2009/DefensePolicy/Policy12/Policy12_5/index.jsp)
Mrs. Kyung Ja Cho: You are right. Actually, a happy soldier makes a strong army. I think it is very important to develop a policy that will prevent competitive military personnel from leaving the service, as well as methods to determine the appropriate level of military pension payment.
e-Veritas: In addition to Pension support, I understand that other elements of the military welfare system ensure decent living conditions for ex-servicemen. The other elements of the military welfare system in ROK include salary, housing, medical, career, enlisted support, family community support, education, programs for children youth, fitness, creation, leisure and cultural activity support. 221.5 billion KRW or .7% of the Defence budget is allocated to the service members welfare. (Source http://www.mnd.go.kr/mndEng_2009/DefensePolicy/Policy12/Policy12_5/index.jsp)
Mrs. Kyung Ja Cho: Absolutely correct. You’ve researched a lot. The budget of the MND for the year 2012 is about $29 billion. But it is difficult to accommodate ex-servicemen well with that budget, because we need to invest in programs for the improvement and maintenance of defence forces. I think we should improve the level of continuous care for ex-servicemen. So the MND has been making efforts to increase capabilities despite reduced numbers (681 military officers were dismissed in 2005, and 655 in 2009), and to convert to a practical, advanced defence management system.
e-veritas: I understand that Korea was a beneficiary of UN assistance during the Korean War. Since the dispatch of an engineering battalion to Somalia in 1993, Korea has participated in global peacekeeping operations with 1,420 troops dispatched to 17 regions in 14 countries, as of January 2011. (Source: http://www.mnd.go.kr/mndEng_2009/DefensePolicy/Policy12/Policy12_2/index.jsp)
Mrs. Kyung Ja Cho: Koreans are thankful for the UN assistance in overcoming the national crises of the Korean War. Korea is returning the favour to the international community by participating in PKO activities. I am very proud of the fact that today, Korea is no longer an ‘aided’ country, but rather an ‘aiding’ country.
e-Veritas: I have read that in Korea, military service is a constitutional duty; the Law on Conscription applies to all males, offering some 30,000 soldiers each year.
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Mrs. Kyung Ja Cho: That’s one of the reasons why we’ve been trying to achieve an everlasting peace on the Korean Peninsula. Meanwhile, the government tries to encourage a military service culture where all citizens cherish their sacred duty and right. The soldiers can keep on studying on the net during their service period. At this time, there are about 8.24 million Korean males between 18 and 35, 16.8% of the total population, who are serving or are set to serve in the national defence. Thankfully, most Koreans consider this duty a part of their lives.
e-Veritas: Can you compare the military pension systems in Canada and the Republic of Korea.
Mrs. Kyung Ja Cho: There are four public pension programs in Korea: the National Pension (1988), the Government Employees Pension (GEP) (1960), the Military Personnel Pension (MPP) (included in the GEP as of 1960, separated from the GEP in 1963), and the Teachers Pension (1974).
The MPP provides annuities and various other benefits in cases of retirement, death, or job-related disability in military personnel. But let me explain the National Pension. It provides pension benefits in the event of old age, disability, or death of a breadwinner with a view to contributing to the continuing livelihood of the citizens and the welfare of the nation. It is structurally very similar to the CPP, but it started (in 1988) later than any of Korea’s other public pensions, because we had been developing, with no resources with which to establish a social security system. Anyway, residents of Korea, from 18 to 60 years of age, regardless of their income, contribute to the National Pension. But government employees, military personnel, and private school teachers are excluded, because they are covered under their own pension plans. If these people retire at an age less than 60, they can contribute to the National Pension until they reach 60. Starting at 3% in 1988, the contribution rate was raised to 6% in 1993, and to 9% in 1998. It remains at 9% today, while in Canada the rate is 9.9%. I will show you some facts.
According to official classification, the Canadian pension income system mainly consists of three pillars. The first (Old Age Security, Guaranteed Income Supplement, Allowances) and second pillars (CPP/QPP) consist of mandatory savings enforced by government in the form of taxed income, and the third pillar is the personal savings pension plan, contributed to by the employer, or individuals on a voluntary basis.
*1) Pensioners with an individual net income above $67,668 must repay part or all of the maximum Old Age Security pension amount. The repayment amounts are normally deducted from their monthly payments before they are issued. The full OAS pension is eliminated when a pensioner’s net income is $109,607 or above.
*2) For Spouse of Allowance recipient, the Allowance stops being paid at $29,376 while the GIS stops being paid at $38,112.
In the third pillar are the employer sponsored plans, also known as the Registered Pension Plans (RPPs). They are invested in by the employers or the employers and employees. The employers make the decision on which financial institution to invest through. Once a contribution is made, the employers and employees cannot take back control of the money, requesting a refund, etc. Employees are not at liberty to extract the money. They have to wait till retirement to receive it. In addition, personal savings towards retirement are made mainly in the form of Registered Retirement Savings Plans (RRSPs). An RRSP is a personal retirement plan that needs to be registered, with the recipient or recipient’s spouse or common-law partner establishing the plan and contributing to it. The maximum RRSP contribution limit for the year 2011 was $22,450. 67% of the Canadian labour force and three in four private sector employees in the year 2010 were not covered by an occupational pension, so RRSPs can be valuable as an alternative source of retirement income.
Let’s talk about military pensions. The goal of military pensions, to secure the veteran’s life after retirement, is the same between the two countries. Most retirement planners assume a 70 to 80% income replacement ratio will do the job. Indeed, public service pension plans typically pay pensions of 70% of service income to those who retire after 35 years of service. This is quite higher than many other countries. But Statistics Canada has found that most people retire on less than 70 to 80% of their pre-retirement income. With Korean military pensions, only military officers contribute, until 33 years of service. There is no military pension for enlisted soldiers, as male Koreans between 19 and 35 years of age serve mandatorily for 21 to 24 months. Instead, a military service credit of 6 months’ coverage is granted to one who has successfully finished his military service, as part of the National Pension. And this has only applied to those who started their military service after January 1, 2008. The government wholly provides the funding for this credit.
The big difference in military pensions comes from the pension systems themselves. Canada has a three-pillar system that covers Canadian Forces personnel, as citizens in one pillar, and as government employees in another. Also, there is the Canadian Forces Pension, the Regular Force (Full-Time) Pension Plan, and the Reserve Force (Part-Time) Pension Plan. However, Korea has only one: the Military Pension. Of course, there are private pensions you can contribute to in Korea, but these are a kind of voluntary savings.
Subject to coordination with the pensions paid by the Canada Pension Plan (CPP), the initial rate of retirement pension is equal to 2% of the highest average of annual pensionable earnings over any period of five consecutive years, multiplied by the number of years of pensionable service not exceeding 35. In Korea it is the annual pensionable earnings over the three years before retirement. In Canada, the pension is indexed annually with the Consumer Price Index, and the accumulated indexation may be payable, at the earliest, at age 55. Entitlement to benefits depends on the extent of the recipient’s service.
Below, the numbers of contributors and pensioners are compared in the Canadian and Korean forces.
You can see that the ratio of pensioners vs. contributors is lower with the Korean Military Pension (169,814 contributors and 49,453 pensioners) than the Canadians’ (93,539 contributors and 113,399 pensioners). We have about 20,000 retired officers every year, but about 3,300 people have served over 20 years and are eligible for annuities. Those who have served less than 20 years are eligible only to get a Return of Pension Contribution, which cannot secure their lives in old age. Therefore, in 2009, the Korean government established the Public Pension Linking System, under which servicemen can layer another contribution on top of their previous contribution periods. They can be eligible for annuities after more than 20 years of contribution.
The average retirement pension with the Korean Military Pension for 2010 was $1,973 per month. Compared to the Korean National Pension, it can be considered huge money, but after having served more than 20 years, it is not enough money for one to live with afterwards, because they are supposed to be retired at the age of 45 to 56, which is a very expensive time of life. In addition, it is difficult for them to get a job after military retirement, in a private market, even though the government tries to offer jobs and reeducate them.
Also, the Canadian Forces Pension is slightly different, depending on one’s career, because everyone’s career is unique. Korea has a simple system that depends on service periods and ranks. The principle of contribution is the same. In 2011, military officers contributed 8.5% of their pensionable income, and the government contributed the same amount. The contribution rate of CF members is 5.8% for those earning anything up to the Year’s Maximum Pensionable Earnings (YMPE), and 8.4% for those earning above the YMPE.
Canadian military persons can serve until 65 years of age, and can be paid from the age of 65, and Korean veterans can be paid starting at the month after they retire, after 20 years of service; there is a mandatory retirement age, according to their rank. For example, the retirement age of a noncommissioned officer is 45 to 55, a warrant officer’s is 55, a lieutenant’s or a captain’s is 43, a major’s is 45, a lieutenant colonel’s is 53, a colonel’s is 56, and a general’s is 58 to 63.
The Korean Military Pension fund has about $354 million, and the expenses are about $ 2,353 billion. Every year, the government subsidizes the deficit of the pension. The MND of the ROK considers the budget for the Military Pension as a deferred payment to servicemen. But there are controversies around the budget.
Below is an outline of the average annual pensions in the Canadian forces and Korean forces in 2010.
Average Annual Pension (CAD)
Korean Forces Annual Retirement Pension (31 Dec 2010)
When South Korea was underdeveloped, there were many people who wanted to be military officers. However, recently the number of them has been decreasing, because the working conditions are bad compared to those of the private sector. For example, they risk their lives in wartime, and about 50% of the officers live in rural areas, where there is a lack of cultural facilities, and schools for their kids.
I hope that my country will become developed, and is capable of providing a better social security system for its people. It has been an honour and a pleasure talking to you.