It was predicted that the low birth rate and the aging population would have a negative effect on the funding of the national pension, and that the fund would run out sooner than expected.
On the 27th, the National Pension Financial Estimate Expert Committee of the Ministry of Health and Welfare (Financial Cold) announced the results of the 5th National Pension Financial Estimate (2023-2093) with these contents.
Fiscal estimates have been carried out every five years since 2003, and results are available in March. This time, at the request of the Private Advisory Committee under the National Assembly’s Pension Reform Special Committee, it was moved forward two months from the original version. timetable.
According to the results of the fiscal estimate, it is predicted that, if the current national pension system is maintained, there will be a deficit from 2041, when expenditure exceeds income, and the fund will have been depleted by 2055.
Compared to the results of the 4th financial census in 2018, the previous year, the lack of balance was postponed by one year and the depletion of the fund by two years. The maximum size of the reserve fund also dropped slightly from 1,778 trillion won in the fourth round to 1,775 won.
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With regard to the fiscal cold, reference was made to a deteriorating demographic structure due to a low birth rate and an aging population and slowing economic growth as important factors that negatively affect the finances of the National Pension Service.
As the total fertility rate falls, the number of subscribers decreases, but the number of beneficiaries is expected to increase due to an increase in life expectancy, leading to a decrease in income from insurance premiums and an increase in spending on benefits.
Accordingly, the financial cold also introduced the necessary insurance premium rate to stabilize the national pension funding. In the case of the 5th financial census, the required insurance premium rate for each target scenario for the reserve size was set higher by about 1.66%pi 1.84%p than in the 4th financial census.
For example, in order to overcome the “lack of balance” situation where expenditure is greater than income, it is analyzed that the insurance premium rate should be raised from the current 9% to 19.57% by 2025 and to 22.54% by 2035. In the fourth fiscal estimate last time, an increase of 18.20% in 2020 and 20.22% in 2030 was suggested.
Compared to the 4th fiscal census, the decline in the demographic structure led to an increase in institutional support costs, resulting in an increase in the pay-as-you-go cost ratio.
From 2055 onwards, the year of the masses foreseen in the fund, the pay-as-you-go cost ratio was 26.1%, an increase of 1.5% compared to the fourth financial census (24.6%).
The pay-as-you-go cost rate is the required insurance premium rate when it is assumed that only the current year’s premium income covers the current year’s benefit expenditure, and it is affected by the demographic variable.
Jeon Byeong-mok, chairman of the Financial Estimate Expert Committee, said, “The results of the national pension financial estimate are prediction results assuming that the current system is maintained without adjusting the details of the system, such as insurance premium rate, income replacement rate, and age of subscriber/recipient.” It should be used as reference material for the ongoing discussion on pension reform in the National Assembly and the establishment of a comprehensive management plan for the national pension in the future, rather than focusing on it.”
Inquiries: Ministry of Health and Welfare Financial Estimate Expert Committee (063-713-6732), National Pension Policy Division (044-202-3601)
