Men in mandatory military service left out of youth savings program

A service member checkes a barbed wire fence inside the Demilitarized Zone in Yanggu, Gangwon Province, in this December 2023 file photo. Korea Times file

Korea Inclusive Finance Agency's reported rejection of men completing mandatory military service from opening government-subsidized savings accounts, or Youth Leap savings accounts, for young adults has sparked controversy here.

The Youth Leap program is a savings product introduced by the Yoon Suk Yeol government as one of his campaign pledges. It aims to help young adults between 19 and 34 who make less than 75 million won ($56,158) annually to save up to 50 million won if they deposit 700,000 won monthly over five years, with the government paying the remainder.

However, not all young people can enroll in the program. Applicants must have documented earnings, meaning only those who paid taxes in the year before applying can sign up.

The wages conscripted men receive from the government aren't taxable income under the current tax codes, and as a result, they are disqualified from participating in the savings program.

"The majority of young individuals spend their early 20s completing mandatory military service. How can excluding them from supportive measures be considered a policy aimed at young adults?" the main opposition Democratic Party said. "They have heeded the nation's call to service, only to find that it places them at a disadvantage."

Promotional images of Youth Hope program / Yonhap

However, some say limiting eligibility to those who have fulfilled their tax-paying responsibilities is justifiable for a project financed by a significant portion of the national budget.

There's also concern over the potential for duplicating benefits. Since military salaries are classified as non-taxable income and viewed as compensation for service, providing additional rewards through policy-driven financial products could be seen as redundant.

Additionally, even though the program has an age limit of up to 34 years for enrollment, the time spent in military service is excluded from the age calculation, posing another possibility for double benefits.

As the controversy over excluding service members intensifies, the government is reportedly re-evaluating the eligibility criteria for the program.

Kwon Hyuk-joong, an economics expert, said that the government is in a difficult position.

"Should the government decide to make an exception in the case, it would then need to consider including young part-timers who also lack tax records [due to receiving their wages in cash]," Kwon said.

A financial official said that the government is taking various factors into account before making a decision.

The program initially launched last June. Yet, it's attracting renewed attention as Youth Hope, a youth savings program developed by the former Moon Jae-in administration, is expiring.

The government has permitted those whose Youth Hope accounts have reached maturity to transition to the Youth Leap program.