As the government accelerates pension reform, Authorities predict the national pension fund will be depleted by 2055came out This is a result two years faster than the simulation five years ago. Rather than worsening economic conditions at home and abroad A declining population and a growing dependent population have a definite impactturned out to be crazy.
The government released its fiscal estimates two months ahead of schedule, originally scheduled for March, when considering the deadline for the activities of the Special Committee on Pension Reform in the National Assembly.
The National Pension Financial Estimate Expert Committee (Financial Estimate Committee) held a briefing at the government complex in Seoul on the afternoon of the 27th and announced the results of the 5th National Pension Financial Estimate. The national pension financial calculation was introduced in 1998 to evaluate the financial soundness of the pension from a long-term perspective and to suggest a developmental direction. The Government Financial estimates derived every 5 years since 2003 based on the National Pension Actand presented a comprehensive action plan that reflects the direction of improving the system to the National Assembly by the end of October of the same year.
The Financial Estimates Committee, formed in August last year, At the request of the Private Advisory Committee under the Special Pension Committee, the trial census results were presented two months earlier than before.He said. The private advisory committee plans to draw up its own reform plan by the end of this month based on the results of this trial. The Special Committee on Pensions intends to refer to this and gather public opinion before presenting a draft amendment by April.
According to the 5th estimate, under the assumption that the current system is maintained, the national pension will maintain a structure where income exceeds expenditure for the next 20 years. As the low birth rate and aging population intensify and the economy slows, From 2041, 18 years later, there will be a deficit in the account where the total income, which is the sum of the insurance premiums and investment income of the fund, exceeds the expenditure.was expected to do Funding will end in 2055predicted to
was the most recent Compared to the 4th estimate in 2017, the deficit was turned into a deficit of one year, and the point of depletion of the fund was moved forward by two years.
The reserve is expected to peak at 1,755 trillion won in 2040, just before a deficit occurs. This scale also decreased by 23 trillion won from the 4th census (1,778 trillion won).
The Fiscal Estimates Committee explained that it first calculated changes in salary expenditure and reserves based on basic assumptions about population, economy, and organizational variables agreed through a total of 16 meetings.
The estimated period is ‘the next 70 years’ (2023-2093)to be. Isran, director of the Ministry of Health and Welfare’s Pension Policy Office, said, “Although it is possible to join the national pension from the age of 18, if you join at the age of 20 and die at the age of 90 (in terms of life cycle), it will takes about 70 years.” Consideration was also given to uncertainty in long-term projections and consistency with previous calculations.
A direct blow to pension funding was the rapid demographic change.All.
Korea’s fertility rate, which is at the bottom of the OECD (Organization for Economic Co-operation and Development) member countries, is walking downhill every year. which is 0.81 in 2021 The total fertility rate (the number of children expected to be born to women of childbearing age in their lifetime) is expected to fall to 0.73 from last year.to be. The Finance Estimates Committee applied the Office for National Statistics’ ‘Future Population Estimate 2021’ median assumption to determine the total fertility rate. It is forecast to rebound gently after bottoming out at 0.70 next year. The total fertility rate is expected to rise to 0.96 in 2030 and record more than 1 (1.21) after 2046.
The fact that the number of marriages, which had plunged due to the prolonged Corona 19 epidemic, will improve to the level of the previous year, and that those born in 1991 who belong to the second eco-prosperity generation (born between 1991 and 1996) enters. age of marriage in their 30s was cited as a basis.
Of course, even with this assumption, This is a decrease compared to the 4th fiscal projection, which set the total fertility rate at 1.38 after 2050.All. On the other hand Life expectancy, which is 84.3 years this year, will increase to 91.2 years in 2070expect to do it
By 2093, Korea’s total population will shrink to 27.82 million, a decrease of about 46% compared to this year (51.56 million). The population aged 18 to 64, the age group covered by the national pension, will decrease from 35.01 million to 12.95 million, and the population aged 65 and over will double around 2050 (9.5 million → 19 million), then decreased to 12.01 million in 2093. thinglook like
The number of subscribers to support the pension funding is falling, but the elderly population eligible for the pension is increasing. A reduction in insurance premium income and an increase in salary expenditure is inevitableto be.
The ratio of old age pension recipients to the population aged 65 or over will gradually increase from 44.0% this year to reach 84.2% in 2070 (excluding disability pension and survivors’ pension)That is the Committee’s analysis. The system support ratio, which calculates the number of subscribers as the denominator and the number of old age pension recipients as the numerator, is expected to peak at 143.8% in 2078.
The burden on future generations has naturally increased. Calculate the required insurance premium rate on the assumption that only the insurance premium income for the year covers the salary expenditure for that year. Looking at the ‘pay-as-you-go utilization rate’, it is 26.1% in 2055, which is the expected year of fund exhaustion, an increase of 1.5% from the 4th estimate (2057, 24.6%).he did
Based on these results, the Financial Estimates Committee presented various financial goals for ‘stabilizing pension funding’ and calculated the level of premium rates necessary to reach the target just by raising premium rates. The required insurance premium rate for each target scenario for the reserve size increased by about 1.66~1.84% compared to the 4th financial census. The Committee’s explanation is that this is the result of the delay in reforming pensions.
Regarding the fiscal target for 2093, the end of the estimated period, five scenarios were used: △1x savings rate △2x savings multiplier △5x savings multiplier △no account deficit △maintain a constant savings multiplier.
In addition, wage growth rate, interest rate, inflation rate, etc. are based on future population projections They found that major macroeconomic forecasts have relatively little impactdo. “The real economic growth rate and the real wage growth rate are projected to be low, and the interest rate, inflation rate, and fund investment return rate are similar to those of the 4th quarter,” said Isran Director. This will lead to a reduction in payroll costs,” he said.
Some positive changes were also seen in organizational variables. Both the national pension subscription rate and the local subscriber collection rate increased, and the ratio of those exempt from paying fell. Director Lee “Organizational variables are fiscally neutral as they affect premium income and payroll expenditure, but the effect on income appears before expenditure.”He said.
Jeon Byung-mok, chairman of the Financial Estimate Expert Committee, “The results of the national pension trial calculation are based on the assumption that the current system will be maintained without modifying the details of the system, such as insurance premium rate, income replacement rate, and the age of the subscriber/recipient.”“Instead of focusing on the year the fund was depleted, it should be used as a reference for the ongoing discussions on pension reform in the National Assembly and the establishment of a comprehensive management plan for the national pension in the future,” he stressed.