[Exclusive] Next Year, 10 Trillion Won of National Budget to Be Invested Only in Military and Civil Servant Pensions

Total Financial Input for 4 Major Pensions in 2024 Reaches 10.1462 Trillion KRW
Surpasses 10 Trillion KRW for the First Time Ever
10.024 Trillion KRW Allocated to Military and Government Employee Pensions Only

Over 10 trillion won of taxpayers' money will be invested next year to support the Civil Servant Pension and Military Pension. This amount represents an increase of more than 14% compared to this year.

According to the National Fiscal Management Plan submitted by the Ministry of Economy and Finance to the National Assembly on the 4th, the government's financial input into the two occupational pension funds next year will be 10.024 trillion won, an increase of 1.2732 trillion won (14%) from this year's 8.7508 trillion won. Looking at the financial input amounts for this year and next year, the Civil Servant Pension will increase by 16.9% from 5.6491 trillion won to 6.6071 trillion won, and the Military Pension will increase by 10% from 3.1017 trillion won to 3.4169 trillion won. On the other hand, the national support amount for the National Pension will only increase by 5.7%, from 10.5 billion won this year to 11.1 billion won next year. The Private School Pension will decrease by 7.2%, from 1.0899 trillion won to 1.0111 trillion won.

The reason for the increase in next year's financial input for the Civil Servant Pension and Military Pension is due to the growing financial deficits of these pensions. Both funds are already experiencing resource depletion, and the government is covering the shortfall. According to the Ministry of Economy and Finance, the Civil Servant Pension, which recorded a deficit of 4.0771 trillion won this year, is expected to have a deficit of 4.4411 trillion won next year, an increase of 364 billion won (8.9%). The Military Pension deficit will increase by 170 billion won (5.52%), from 3.0789 trillion won to 3.2489 trillion won during the same period. Although recent reform discussions have focused on the National Pension, the financial difficulties of occupational pensions are more severe. The Civil Servant Pension has been running deficits since 1993, and the Military Pension since 1973, requiring government financial support. The Private School Pension is also expected to run a deficit within a few years. The National Assembly Budget Office forecasts the Private School Pension will turn to deficit by 2029.

Mandatory Expenditure for Civil Servant Pension is 24.8837 trillion won next year, Military Pension is 4.0408 trillion won

Mandatory expenditures for the two occupational pensions are also expected to increase. The mandatory expenditure for the Civil Servant Pension was projected to be 22.698 trillion won by the end of this year, but next year it is estimated to increase by 9.6% to 24.8837 trillion won. The Military Pension's mandatory expenditure will increase from 3.8463 trillion won to 4.0408 trillion won. The total mandatory expenditure for the four major pensions, including the National Pension and Private School Pension, is expected to rise from 67.6915 trillion won this year to 77.6343 trillion won, an increase of 14.6%.

The reason why the amount to be spent is increasing amid worsening fund deficits is that the number of pension recipients is continuously rising due to increased life expectancy, while the number of contributors paying premiums is decreasing. The Ministry of Economy and Finance predicts that the number of Civil Servant Pension recipients will increase from 635,000 in 2023 to 674,000 in 2024, and 790,000 in 2027. All recipients have longer contribution periods than those of the National Pension, and although premium rates are higher, pension payments are also relatively large, which affects the financial burden. The premium rates for the Civil Servant Pension and Private School Pension are 18%, and for the Military Pension 14%, higher than the National Pension's 9%, but the income pension replacement rate is set high, leading to ongoing calls for occupational pension reform.

Discussions on occupational pension reform are stagnant. Pension reform discussions are focused on the National Pension. The pension reform plan presented by the National Pension Financial Calculation Committee under the Ministry of Health and Welfare on the 1st of last month also concentrated on the National Pension. The final progress report summarizing the first phase of activities by the National Assembly Pension Reform Special Committee's private advisory group in March did not propose specific reform measures related to occupational pensions. With the general election next year and the National Assembly Pension Special Committee's activities scheduled to continue until October, it is uncertain whether reform plans for occupational pensions will be included.