By 2027, Pension Benefits to Exceed Contributions by Over 3 Trillion Won
Due to declining birth rates and an aging population, the number of people paying National Pension contributions is decreasing, while the number of recipients is steadily increasing.
According to the latest published statistics from the National Pension Service on June 15, the total amount of pension benefits paid to recipients in February was 4.0238 trillion won. This is an increase of 77.5 billion won from January's payment of 3.9463 trillion won, marking the first time that monthly National Pension benefit expenditures have exceeded 4 trillion won. If this trend continues, the total annual payout for this year is expected to reach 50 trillion won.
As both the number of National Pension recipients and the average pension amount per person increase, the scale of annual benefit expenditures is expanding rapidly. After surpassing 1 trillion won for the first time in 2012 with 11.5508 trillion won, it exceeded 20 trillion won in 2018 with 20.7527 trillion won, six years later. It then reached 34.0201 trillion won in 2022 and 43.0748 trillion won last year. It took 24 years from the introduction of the system in 1988 to surpass 10 trillion won, six years to reach 20 trillion won, four years to reach 30 trillion won, and two years to reach 40 trillion won. Now, it is set to surpass 50 trillion won in just one year.
The number of people reaching the eligible age for pension is increasing rapidly, with the total number of recipients in 2024 (including those whose eligibility expired due to death after qualifying in 2024) reaching 7,372,039, an increase of nearly 550,000 from the previous year.
On the other hand, due to low birth rates, the number of contributors to the National Pension continues to decline. After peaking at 22.5 million in 2022, the number dropped to 22.38 million in 2023 and 21.98 million in 2024, marking two consecutive years of decline. In 2023 alone, the number fell by 400,000, and as of February 2024, it further decreased by about 167,000 to 21.082 million.
Although contribution income still exceeds benefit expenditures for now, there are projections that benefit payments could soon surpass contribution income.
In its mid-term fiscal outlook report (2024-2028) released last year, the National Pension Research Institute predicted that annual pension benefit expenditures would reach 51.9564 trillion won this year, increase to 59.5712 trillion won in 2026, and further rise to 67.6071 trillion won in 2027.
Contribution income is expected to increase moderately, reaching 62.0221 trillion won this year, 63.2083 trillion won in 2026, and 64.3535 trillion won in 2027. However, by 2027, benefit expenditures are projected to exceed contribution income by more than 3 trillion won.
With the amendment of the National Pension Act, the contribution rate will gradually increase by 0.5 percentage points each year starting in January next year. While this will boost contribution income compared to last year's projections, benefit expenditures are also rising rapidly, making it inevitable that expenditures will soon overtake income.
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