Teachers’ Pension will launch a review of its scheme to address concerns over a pension shortfall, as the number of pensioners has increased rapidly in recent years.
The South Korean fund recently issued a request for proposals seeking a consultant that will perform analysis of its financial status and issues to be fixed for the next nine months. A final report, which will be prepared by the firm by November, will be used in discussions on how to improve the fund scheme.
The fund will likely begin to have a deficit in 2029 and exhaust its assets in around 2049, according to a 2020 forecast by its finance committee.
The focus of the review will be the sustainable management of assets. Teachers’ Pension will compare its pension payments with those of local peers such as the National Pension Service to keep them at a fair level. Other measures to address the fund shortfall will likely include forecasting its balance for at least the next 70 years and studying cases from foreign peers.
Most South Korean pension funds are supervised by relevant government ministries, but Teachers’ Pension operates its own management system. Its pensioners grew at an annual rate of 8.94% between 2015 and 2019.
The fund last year achieved an investment return of 2.14 trillion won ($1.95 billion), its largest to date, which brought its assets under management to 23.23 trillion won. It yielded a return of 11.49%, recording double-digit returns for two consecutive years.
The results were attributed in a press release to “efforts by the fund to navigate low rates and low growth by increasing allocations to stocks and alternative assets at the expense of bonds”.
The fund aims to raise its allocation to alternative investments from 20.6% in 2020 to 29.6% in 2024 as part of efforts to diversify away from traditional assets. Last year it also revamped its alternative investment team by splitting staff into groups based on alternative asset classes. (Reporting by Ar-rum Rho)