“National Pension Fund Has Stabilized”

A government report shows that the reserve of the National Pension Fund will dry up by 2060 but it is currently in a stable condition. Compared to the research result in 2003, the National Pension Fund has significantly stabilized. The fund would begin decreasing later than expected by eight years and would dry up much later than the previous estimate by 13 years.

The Dong-A Ilbo exclusively obtained the report on the pension fund released by the Committee of National Pension Fund Estimation, yesterday. According to the report, the National Pension Fund will begin decreasing after peaking at 2,465 trillion won in 2043, and will make a deficit of 214 trillion won in 2060.

Also, the report estimated that the number of pensioners will gradually increase from 2.19 million in 2008 to exceed 5 million in 2024, reach 8 million in 2036, and finally surpass 10 million in 2046.

The committee, established by the former administration to estimate long-term prospects for the National Pension Fund in June 2007, consists of 17 experts. In accordance with the National Pension Act, the committee has to release a new forecast for the National Pension Fund every five years. After releasing its first forecast in 2003 and second this year, it will release its next estimation in 2013.

The report implies that financial conditions of the National Pension Fund have significantly stabilized compared to 2003.

In 2003, the committee predicted that the reserve in the National Pension Fund would peak at 1,715 trillion won in 2035 and dry up in 2047 when the fund is expected to make a deficit of 96 trillion won. However, the committee’s report of 2008 announced that the pension fund would dry up in 2060.

The committee could release such an improved forecast since the National Pension Act was passed in the National Assembly in July 2007. According to the act, the pension rate is fixed at 9 percent but the income replacement ratio will be gradually lowered to 40 percent.

A committee member said, “No advanced nations including European countries and the United States have a reserve that can be distributed for 52 years. As Korea’s National Pension Fund has somewhat stabilized, Korea should make a gradual reform through which small but meaningful improvements can be made, instead of overhauling the relevant system while worrying that the fund would dry up soon.

Sources at the Ministry of Health, Welfare and Family said, “We’ll find measures to improve the system based on the new forecast. As financial conditions have stabilized, we’ll neither raise the rate again nor lower the amount of pension premiums for the time being.”

corekim@donga.com