Military Pension Yield Plummets... 1.6 Trillion Won in Taxes Injected This Year

Military pensions were introduced in 1963, making them the first among the four major pension schemes.

[Asia Economy Yang Nak-gyu, Military Specialist Reporter] Last year, the investment return rate of the military pension was found to be only in the 3% range. As a result, the deficit of the military pension has expanded, and this year alone, 1.6 trillion won in taxes have been poured in.

According to the Ministry of National Defense on the 8th, as of November last year, the military pension return rate for 2020 was 3.05%. The military pension return rate exceeded 3% only three times in the past decade (4.7% in 2010, 3.12% in 2012, and 5.59% in 2019). In 2018, it even recorded a negative return (-2.18%).

The Ministry of National Defense explains that the seemingly low return rate last year is because the return rate in the previous year, 2019, was unusually high at 5.59%. However, that year, the National Pension return rate reached 11.34%, the Government Employees Pension was 8.36%, and the Private School Pension was 11.1%.

The military pension’s annual pension payments far exceed the pension income received. On top of that, with a low investment return rate, deficits accumulate and the government compensates annually with taxes. This year, the military pension expenditure is 3.5426 trillion won, of which 1.6012 trillion won is covered by taxes. A Ministry of National Defense official said, "The military pension fund prioritizes stable investments with a high proportion of bonds as a reserve fund, so its return rate is relatively low compared to other pensions."

However, inside and outside the military, many view the cause as a lack of expertise rather than the investment tendency of the military pension. As a solution, there are proposals to hire more investment experts and establish a separate corporation to manage the fund. The military pension has no separate corporation, and only three Ministry of National Defense staff members manage the fund. Investments are entrusted to external investment management companies. In contrast, the National Pension has 324 investment experts within its corporation. The Government Employees Pension Fund is managed by the Government Employees Pension Corporation (33 members), and the Private School Pension Fund is managed by the Private School Staff Pension Corporation (38 members).

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