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The Financial Effects of Extending the Normal Retirement Age and/or Implementing the Wage Peak System

  • Journal of Insurance and Finance
  • 2017, 28(3), pp.81-102
  • DOI : 10.23842/jif.2017.28.3.004
  • Publisher : Korea Insurance Research Institute
  • Research Area : Social Science > Business Management
  • Received : June 14, 2017
  • Accepted : August 16, 2017
  • Published : August 31, 2017

Sung Jooho 1 Dong-Geon Shin 2 Sanghyun Bae 3

1경희대학교
2IBK
3미래에셋생명

Accredited

ABSTRACT

In Korea, population aging is rapidly progressing due to lower fertility rate and longer life expectancy. As a result, the working age population peaked in 2016 and is expected to decline sharply thereafter. As one of the alternatives to reduce the working age population, Korea government passed the bill to extend the retirement age of workers in 2013, and it is mandatory to extend the retirement age of entire workplace in 2017. However, the extension of retirement age will increase the financial burden of labor costs of the company, as it includes problems such as a decrease in new hiring; thus, the introduction of a wage peak system is considered. Therefore, in this paper, under the various scenarios, using the quantitative indicators of future expected retirement benefit present value(PVFB), the effect of introducing retirement age and wage peak system on retirement benefit financial burden of enterprises were measured. This suggests that the influence of the retirement and discount rate is high and that research on reflecting extension of retirement age is an urgent task.

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