National Pension Service Sets Target Return Rate at 5.4% for the Next 5 Years

[Asia Economy Reporter Park So-yeon] The National Pension Fund Management Committee has set a target rate of return of 5.4% for the next five years.

On the 27th, the National Pension Fund Management Committee held the 3rd meeting of 2022 and reviewed and approved the '2023~2027 National Pension Fund Medium-Term Asset Allocation (Draft)' and the '2023 National Pension Fund Operation Plan (Draft)'.

The first agenda item, the '2023~2027 National Pension Fund Medium-Term Asset Allocation (Draft),' approved a target rate of return of 5.4% for the next five years.

The medium-term asset allocation plan is a five-year fund management strategy established annually to enhance the fund's profitability and stability.

It reflects the domestic and international economic outlook for the next five years, expected returns and risks by asset class, and determines the fund's target rate of return and target proportions by asset class.

The Fund Committee comprehensively considered the need for active fund management during the fund accumulation phase and the impact on the market to set the target rate of return and target proportions by asset class.

Accordingly, to achieve the target return of 5.4%, the target asset allocation by the end of 2027 was set at approximately 55% equities, 30% bonds, and 15% alternative investments.

The target proportions by asset class will be adjusted gradually and step-by-step rather than changed abruptly, considering market impact and feasibility of implementation.

According to the approved medium-term asset allocation plan, the National Pension will continue its investment diversification policy to contribute to fiscal stabilization by enhancing the fund’s long-term returns, including expanding the proportion of risk assets and overseas investments compared to the previous year.

The next agenda item approved was the 2023 National Pension Fund Operation Plan (Draft), which is the annual operation plan to achieve the target proportions of the 2023~2027 medium-term asset allocation (Draft).

The target asset allocation by the end of 2023 according to the medium-term asset allocation plan was set at 15.9% domestic equities, 30.3% overseas equities, 32.0% domestic bonds, 8.0% overseas bonds, and 13.8% alternative investments.

The fund’s income for 2023 is expected to be about 153 trillion KRW, including 56.5 trillion KRW from pension insurance premiums, and expenditures are expected to be about 34 trillion KRW, including 33.2 trillion KRW for pension benefit payments. Approximately 119 trillion KRW, the difference between income and expenditures, will be managed as surplus funds.