Seoul: The National Assembly approved a landmark reform of the nation's ailing pension system Thursday, marking the first comprehensive overhaul of the public pension fund in nearly two decades. The reform aims to make the fund more sustainable and was passed in a 194-40 vote, with 43 abstentions, following a significant agreement between the ruling and opposition parties.

According to Yonhap News Agency, the revised pension bill calls for increased premium payments and enhanced pension benefits. Under the new scheme, the pension contribution rate is set to rise from the current 9 percent to 13 percent, and the nominal income replacement rate will increase to 43 percent from the existing 40 percent. The contribution rate will incrementally increase by 0.5 percentage points annually over the next eight years, starting next year, while the income replacement rate will be implemented at 43 percent beginning next year.

Earlier in the day, an agreement was signed by Rep. Kweon Seong-dong, floor leader of the ruling People Power Party (PPP), and Park Chan-dae, floor leader of the main opposition Democratic Party (DP), during a meeting organized by National Assembly Speaker Woo Won-shik. This agreement emerged after discussions among rival party lawmakers and Health Minister Cho Kyoo-hong, who tackled outstanding issues related to the pension reform proposal.

Last week, the Democratic Party accepted a government and PPP proposal to raise the nominal income replacement rate to 43 percent. Adjusting this rate, which reflects the proportion of pre-retirement monthly wages covered by the pension, was a major point of contention in the proposed reform.

South Korea's pension system, established in 1988, was initially designed to ensure a certain income level after retirement. However, with the nation experiencing rapid aging and declining birth rates, concerns have grown that future generations might not receive pension benefits commensurate with their contributions. The current system is projected to fall into deficit by 2041 and become completely depleted by 2055. The revised system, however, is expected to delay the fund's depletion by nine years.