All problems stem from the graph above. The expectation that the fund would be depleted after about 30 years led to distrust of the national pension. The fear of having to pay about 30% of one’s income as insurance premiums when the fund is depleted sometimes spreads to the absurd argument that ‘I’d rather get rid of the pension system and return my money’.
■ Depletion of pension funds is fictitious…Two critical blind spots in financial estimation
The Ministry of Health and Welfare announced that the pension fund will be depleted in 2055, two years earlier than the survey five years ago, in the national pension financial estimation conducted once every five years. The results of the fiscal projections, which are conducted once every five years, are more pessimistic due to the declining birthrate and deepening aging population.
The reason for making these financial projections is to anticipate what the pension will look like in the future and make the necessary reforms now. Therefore, the results of financial projections should be limited to forecasting the future, the worst that should not happen. There are also two crucial blind spots in the assumptions (assumptions) that made these financial projections.
The national pension is a social insurance fund operated by the state, and the responsibility for managing the pension fund rests with the Minister of Health and Welfare. There have been warnings about problems with the pension system, and it is inconceivable to assume that the state will play no role without overhauling the public pension system. This is because it is equivalent to a declaration that the state will give up supporting the elderly.
■ OECD average public pension spending 7.7% of GDP …Korea? Among the 48 countries surveyed by the OECD
regarding public pensions, Korea spends the least on old-age support (pension), with the exception of Iceland (2.6%) and Mexico (2.7%). As of 2017, the OECD average is 7.7% of GDP , but Korea is only 2.8%. Moreover, Korea spends more than 95% of this cost on basic pension payments. The basic pension that is selectively supported is, strictly speaking, not a pension but a public assistance. Therefore, the Korean government is almost the only unique country that does not spend money on the national pension, a public pension system.
This is probably because the size of the National Pension Service’s own pension fund is so large and the elderly population is still small compared to the economically active population. However, in the future , the need for Korea to invest its finances in pensions, like most OECD countries, is being raised.
Looking at the data above, the Korean government’s current budget for pension is 9.4% of total government expenditure (because of the basic pension). This is only half of the OECD average of 18.4%. This means that Korea still has room and reason to spend money for the elderly. Most developed European countries spend more than 20% of government spending on old age support. In Japan, this ratio is as high as 24%.
Korea’s pension premium, or contribution rate, is 9% of income, which is also only half of the OECD average (18.2%). In the case of an insurance premium increase, there is only a difference of opinion on the rate of increase, but there is already a social consensus that it must be raised to a certain level, so the pension fund will not be exhausted in 2055. On the contrary, the sooner the reform is delayed, the faster the reform is needed because the equity between the generations collapses.
■ Reorganization of ‘3-1-1.5′ will permanently maintain the pension fund’
On the 16th, an eye-opening report was submitted to the Special Committee on Pension Reform of the National Assembly, which is operating to reform the national pension. The presenter is KAIST professor Kim Woo-chang, who is a private advisory member of the special pension committee. Professor Kim Woo-chang, majoring in financial engineering, raised the national pension insurance premium by 3%p (9% -> 12%) by 2030, spent 1% of GDP on the pension fund every year, and메이저사이트 raised the fund management rate by 1.5% p ( Published a research report stating that if the target rate of return is raised from 4.5% to 6%), the pension fund will not be exhausted for more than 100 years while maintaining the level of about 2 trillion won, that is, it will be maintained permanently.Graph <1> is the result of the 5th fiscal projection that the pension fund will be depleted in 2055. appear. (Graph 2). The point of depletion has been delayed by 8 years.This time, if the insurance premium is raised by 3%p and the government spends 1% of GDP on pension funds, the point of depletion of the fund will be delayed to 2077 as shown in graph <3> . (4.5% -> 6%) As shown in the <4> graph below, the pension fund was found to be permanently maintained for more than 100 years at the level of about 2,000 trillion won.
In response to the objection that it is possible to raise the fund’s long-term return on investment by 1.5%p, Professor Kim Woo-chang said that it is possible, and even if the fund’s return on investment is lowered to only 1%p, if the financial input is increased to 1.5% instead, the pension fund It was also revealed that the results obtained did not burn out for more than 100 years.
According to the previous OECD data, Korea currently does not contribute to the national pension at all, so it seems possible enough to spend 1-2% of GDP . Even so, it is at a low level worldwide. Moreover, if the 3-1-1.5 reform is feasible, it will have the effect of completely resolving the problem of intergenerational inequality in the national pension. Rather, since the current generation has provided about 1,000 trillion won in basic assets for pension funds to future generations, wouldn’t it be possible to achieve harmony and respect rather than conflict between generations?
■ Now it’s the government’s turn…’Pension reform needs to start quickly to succeed’ Prof. Kim Woo-chang, who presented the
‘3-1-1.5 Reorganization’ plan, said that Korea’s pension fund of KRW 1,000 trillion is the largest in comparison to GDP among OECD countries . He emphasized that if reforms are carried out in time, Korea can create a stable pension system using the current pension funds as basic assets. However, he added that such a scenario would only be possible starting from 2025.
The reason for this is the rapidly declining economically active population. In fact, Professor Kim Woo-chang explained that the same analysis based on the 4th fiscal projections showed that if the reforms started five years ago, the 3-1-1 reform would have made it possible to maintain the fund permanently. Conversely, if the start of the reform is delayed by five years to 2030, the result is that the pension fund will eventually be depleted by 2093.
With the reform in 2007, the national pension did not guarantee a sufficient retirement income compared to other OECD countries, but secured a large part of financial stability. Now, a small increase in insurance premiums, which are far away from the global average, and a small injection of national finances, which currently have a contribution rate of almost 0% to pension funds, can alleviate public anxiety. It is now the turn of the National Assembly and the government to respond to these criticisms and specific proposals.