[2020 National Audit] Kim Jin-pyo "Only 3 Staff in Charge of 1.2 Trillion KRW Military Pension... Not Even Generating Profit"

[Image source=Yonhap News]

[Asia Economy Reporter Kang Nahum] It has been revealed that there are only three personnel in charge of managing the Military Pension Fund, which oversees assets worth 1.2 trillion won. The Military Pension Fund, which lacks even professional asset managers, has the lowest rate of return among the four major pension funds. Accordingly, there are calls for strengthening the organization of the Military Pension Fund to improve investment returns and enhance financial soundness.

According to Kim Jin-pyo, a member of the National Defense Committee of the National Assembly from the Democratic Party of Korea, the Military Pension Fund is managed by the Fund Team of the Military Pension Division under the Ministry of National Defense. The Fund Team consists of three members: the Military Pension Division Chief at the secretary level, who acts as the Chief Investment Officer (CIO), one administrative officer, and two clerks. This means there are no experts with asset management experience.

Instead, there are committees composed of external members (Asset Management Committee, Risk Management Committee, Performance Evaluation Committee) and advisory groups (Overseas Investment Advisory Group, Alternative Investment Advisory Group, Fund Evaluation Advisory Group). When necessary, matters are submitted to the Asset Management Committee, where members review and decide on investments.

Considering the absence of professional asset managers, the Ministry of National Defense explained that asset management is entrusted to the government's pension investment pool. However, compared to the other three major pension funds (National Pension, Government Employees Pension, Private School Teachers Pension), the fact that there is not a single professional asset manager is seen as problematic.

This leads to poor returns, with the Military Pension Fund's rate of return last year at 6.1%, which is low compared to the National Pension (11.31%), Government Employees Pension (9.3%), and Private School Teachers Pension (10.94%).

The most significant reason why the Military Pension Fund's management organization is important is the deterioration of financial soundness. Since 1973, the fund has been receiving government subsidies due to ongoing depletion, and this year the amount is about 1.5779 trillion won. The National Budget Policy Office forecasts that if the current pension structure is maintained, this amount will increase to 6.7 trillion won by 2090.

The Government Employees Pension also receives government subsidies, but since the pension reform in 2015, the subsidy amount has steadily decreased. At that time, the Military Pension Fund's reform was blocked due to opposition. Accordingly, the average retirement pension amount is about 2.37 million won per month for Government Employees Pension and 2.72 million won per month for the Military Pension Fund. This means the Military Pension Fund operates on a structure where less is paid in but more is received.

Rep. Kim emphasized, "Instead of relying solely on external personnel who work part-time, it is necessary to strengthen professional full-time staff who take responsibility and oversee the entire management." He also pointed out, "Considering the frequent job transfers and short retirement age of military personnel, ways to compensate for reduced pension amounts should be considered, such as expanding welfare programs like the Military Mutual Aid Association's apartment sales project."

This content was produced with the assistance of AI translation services.