South Korea’s national pension fund is expected to be depleted in 2054, according to a report published by the National Assembly Budget Office (NABO) on June 22.
NABO expects that the fund will begin to post a shortfall from 2042 due to the low birth rate coupled with sluggish economic growth. It will eventually be exhausted three years earlier than the government’s previous projection in 2018, which forecast that the fund would be depleted by 2057.
The reason for the differences in the outlook between NABO and the government is because NABO used the latest population projections released by the National Statistical Office last year, while the government used older projections released three years earlier.
Expenses for the national pension fund are on the rise. From 2016 to 2020 the average annual expenses increased by 11.5%, while revenue increased only 6%. As expenses are increasing faster than revenue, this year’s fiscal surplus is forecast to fall 5.2% on-year to 40.536 trillion won ($33.5 billion).
The ageing population could also increase expenses. While it took 11 to 36 years for major OECD countries to become “super-aged societies”, South Korea, which became an ageing society in 2018, is expected to gain super-aged society status in 2025. As the population eligible for social security support increases, it can put a significant burden on the national pension fund.
NABO pointed out that the government should speed up reform of the fund scheme in order to delay the time of its depletion. It also stressed the need for the government to analyze and provide more data, including the prospect of fiscal changes following the reform. (Reporting by Jinwon Lee)