Yejeongcheo, Report on 'Current Status and Future Tasks of Public Pension Reform Discussions'
[Asia Economy Sejong=Reporter Kwon Haeyoung] It is projected that the financial deficit of the four major public pensions will reach approximately 243 trillion won by 2070. The National Pension Service's financial deficit is estimated to reach 211 trillion won, highlighting the urgent need for discussions on public pension reform threatened by rapid low birth rates and aging population.
On the 7th, the National Assembly Budget Office released a report titled "Current Status of Public Pension Reform Discussions and Future Tasks" containing these details.
The Budget Office forecasted that if the current system is maintained, the financial balance of the four major public pensions?National, Government Employees, Private School, and Military Pensions?will shift from a surplus of 38.2 trillion won in 2022 to a deficit by 2040, expanding to a deficit of 242.7 trillion won by 2070. The ratio of the financial balance to the Gross Domestic Product (GDP) is estimated to worsen from 1.76% in 2022 to -6.55% in 2070.
For the National Pension, the financial balance is expected to maintain a surplus from 43.3 trillion won this year to 58.4 trillion won in 2030, then turn to a deficit of -15.9 trillion won starting in 2040. Subsequently, the deficit is projected to grow significantly to -84.9 trillion won in 2050, -168.8 trillion won in 2060, and -211 trillion won in 2070.
The combined financial balance of the four major pensions, including the National Pension and the Government Employees, Private School, and Military Pensions, is expected to record a deficit of -2.3 trillion won in 2040, expanding to -109.8 trillion won in 2050, -198.4 trillion won in 2060, and reaching -242.7 trillion won by 2070.
The Budget Office estimated that if insurance premiums are raised to prevent depletion of the National Pension and Private School Pension reserves, the national burden in 2070 will increase by 20.4% from 1,072 trillion won to 1,290 trillion won. Under the current system, the annual government subsidy per recipient of the Government Employees and Military Pensions is projected to increase 2.4 times from 7.26 million won in 2022 to 17.54 million won in 2070. However, if premium income increases by an average of 10% annually, the government subsidy per recipient in 2070 would decrease by 6.2% to 16.46 million won.
A Budget Office official stated, "As a result of synthesizing the financial balances of the four major public pensions, Korea's public pension system is financially unsustainable," adding, "When discussing pension reform such as raising premium rates or lowering income replacement rates, it is an important policy task to seek a balance between the public pension’s role in securing retirement income and financial stability."
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