Strong Korea Stock Returns Push Back National Pension Fund Deficit to 2050, Depletion to 2069
Summary
- An analysis found the depletion of the national pension fund could be delayed by four years from the previous forecast, driven by strong stock returns in South Korea.
- The report said the national pension fund’s investment return was 18.82%%, while domestic stock returns reached 82.44%%, lifting assets from 1,458 trillion won ($1.06 trillion) to 1,526.1 trillion won ($1.11 trillion).
- It said the number of national pension subscribers is falling while pension beneficiaries and benefit payments are rising, leaving the fund’s finances vulnerable to a short-term market shock.
Forecast Trend Report by Period
Deficit projected to begin in 2050, versus 2048 previously
Strong returns from South Korean equities could delay depletion of the national pension fund by four years from the previous forecast, according to a new analysis.
In a report released June 19, the National Assembly Budget Office said that, if the current system is maintained, the national pension fund will slip into deficit in 2050 and be exhausted in 2069. That is two years later for the deficit and four years later for fund depletion than the agency projected last year. At the time, it estimated the deficit would begin in 2048 and the fund would be depleted in 2065.
The delayed depletion timeline reflects a rally in domestic stocks. The pension fund posted an 18.82% investment return last year, with its South Korean equity holdings returning 82.44%. As a result, the fund's assets rose by 245 trillion won ($178 billion) from a year earlier to 1,458 trillion won ($1.06 trillion) at the end of last year. They increased further to 1,526.1 trillion won ($1.11 trillion) as of the end of March, nearly 500 trillion won ($363 billion) higher than in 2023, when the fund first surpassed 1,000 trillion won ($726 billion).
Long-term fiscal pressure remains. The number of national pension subscribers fell to 21.81 million last year from 22.35 million in 2021, while the number of pension recipients rose to 7.68 million from 5.86 million over the same period. Premium income increased to 63.9 trillion won ($46.4 billion) last year from 53.5 trillion won ($38.9 billion) in 2021, but benefit payments climbed more sharply, to 49.7 trillion won ($36.1 billion) from 29.1 trillion won ($21.1 billion).
The budget office said fiscal results can vary significantly depending on the path of actual returns even when the long-term average return is the same. Short-term market shocks, it added, could leave the fund's finances weaker than projected.
Jang Ji-min, Hankyung.com contributing reporter
Korea Economic Daily
hankyung@bloomingbit.ioThe Korea Economic Daily Global is a digital media where latest news on Korean companies, industries, and financial markets.
