If the national pension system is maintained as it is without reform, it is predicted that a balance deficit will occur from 2041 and the fund will run out by 2055.
Due to the declining birth rate, aging population, and economic slowdown, the point of exhaustion is two years earlier than the previous estimate.
The National Pension Financial Estimation Expert Committee announced the results of such a test calculation today (27th) by estimating the financial balance for the next 70 years under the premise of maintaining the national pension system.
This result is the 5th figure of the national pension financial calculation, which has been done every five years since 2003, and some results were announced two months ahead of schedule at the request of the private advisory committee under the Special Committee on Pension Reform of the National Assembly. According to this, the current national pension system If this is maintained, the structure in which total income (combined insurance premiums and fund investment income) is greater than pension expenditure will be maintained for about 20 years, and as of the end of October 2022, the fund, which is KRW 915 trillion, will record a peak of KRW 1,755 trillion in 2040. prospect to do.
However, from the following year, as expenditures outweigh total revenues, the fund rapidly declines, and it is calculated that it will be exhausted by 2055.
At this point, a fund deficit of 47 trillion won is expected.
Compared to the results of the 4th financial calculation in 2018, the previous year, the balance deficit was delayed by one year and the fund exhaustion was advanced by two years.
The maximum size of the reserve fund also decreased slightly from 1,778 trillion won in the 4th.
These fiscal estimates were made in consideration of population, economy, and institutional variables. Compared to five years ago, the low birth rate and aging population have deepened and macroeconomic conditions such as the economic growth rate have worsened, making the financial outlook for pensions even darker.
As the number of recipients increases due to the maturation and aging of the system, while the number of people paying insurance premiums decreases due to a decrease in the working-age population, the system support ratio, which represents the number of old-age pension recipients relative to the number of subscribers, is expected to increase steeply from 24% this year to 143.8% in 2078.
The pay-as-you-go cost ratio, which is the required insurance premium rate, is expected to rise from 6% this year to 35% in 2078 if expenses are met only with premium income for that year.
The population structure deteriorated compared to the 4th financial calculation, so the institutional support cost increased, and the pay-as-you-go cost ratio in the year the fund was exhausted also increased by 1.5 percentage points from 24.6% in the 4th financial calculation to 26.1%.
Payroll spending as a percentage of gross domestic product (GDP) is projected to increase gradually from 1.7% in 2023 and remain at 9% over the long term after 70 years.
This is similar to the 4th estimate.
The Financial Estimation Expert Committee also presented the necessary insurance premium rates to stabilize the finances of the national pension.
It is a calculation of how much increase is required to achieve the financial goal only by adjusting the insurance premium rate while the 'income replacement rate', which is the ratio of pension receipts to average lifetime income, or the age of subscription is fixed.
According to this, it was calculated that the insurance premium rate, which is currently 9%, should be raised to 17.86% by 2025 in order to secure a reserve equal to the amount of the pension expenditure after 70 years at the beginning of the year.
In calculations for each scenario, assuming that the amount of reserves compared to the pension expenditure is accumulated twice and five times, respectively, the required insurance rate is expected to be 17-24%, which is an increase of 1.66-1.84 percentage points from the 4th financial calculation.
Jeon Byeong-mok, a senior researcher at the Korea Institute of Public Finance and who is the head of the Financial Estimation Specialist Committee, said, "Financial estimation results are forecasts based on the assumption that the current system will be maintained without adjusting the details of the system." Rather, it should be used as a reference material for discussions on pension reform in the National Assembly and for establishing a comprehensive management plan for the national pension in the future.”
The government plans to announce the final results of fiscal projections, including analysis of various scenarios, in March. plan.