['Money-Eating Hippo' Public Pension] 9 Major Funds Receive 15 Trillion Won in Annual Taxpayer Money... "Urgent Reform Needed"

Yoon Seok-myung, Former President of the Korean Pension Association, "Separate Finances but Integrate Pension System Operation and Management"

[Asia Economy Sejong=Reporter Son Seon-hee] The government spends more than 15 trillion won annually in taxpayers' money on major funds, including the National Pension Service. While pension reform is considered a top priority due to forecasts that the National Pension Fund will be depleted in the near future, the fund receiving the largest financial input is the Government Employees and Military Personnel Pension Fund, which is already running a deficit worth trillions of won. Since major funds are barely surviving by receiving massive financial injections every year, there are calls for urgent, comprehensive pension reform that includes the Government Employees and Military Personnel Pension Fund.

According to the "2022-2026 Medium- to Long-term Fund Financial Management Plan Report" recently submitted by the Ministry of Economy and Finance to the National Assembly, the total financial input into nine funds, including the four major public pensions?National, Government Employees, Private School, and Military Personnel Pensions?amounted to 15.6462 trillion won this year. Last year, financial expenditures reached 17.3206 trillion won, and from 2023 to 2026, approximately 13 trillion won will be repeatedly injected annually. This sum includes government revenues for all funds except the large-scale Housing and Urban Fund, which is characterized by public housing investment and loans, among the ten funds designated for medium- to long-term financial management planning under the Enforcement Decree of the National Finance Act.

The problem is that despite such enormous taxpayer funding, some funds are already in a chronic deficit. For example, the Government Employees Pension Fund is expected to record a deficit of about 3 trillion won this year, with the deficit widening to surpass 8 trillion won by 2026. The financial input to cover this deficit is 4.79 trillion won this year and is projected to increase to nearly 7 trillion won by 2026. Over the next five years, including this year, the government will spend a total of 30 trillion won on the Government Employees Pension Fund alone. Despite this massive financial injection, the government estimates that the fund will still run a deficit exceeding 1 trillion won (including internal government accounts) by 2026.

The Military Personnel Pension Fund, which is expected to have a deficit of 2.9 trillion won this year, is also projected to see its deficit widen to about 3.9 trillion won by 2026. The government plans to inject a total of 52.3 trillion won over the next five years (including this year) into the four major public pensions?Government Employees, National, Military Personnel, and Private School Pensions?to cover their deficits.

Korea's population has already begun to decline since 2020, and its fertility rate (0.81 in 2021) ranks the lowest among OECD member countries. Meanwhile, aging is progressing rapidly as a structural problem, and delaying pension reform will inevitably increase the burden on the public.

Although the new government has launched "cooperative pension reform" as one of its core national agendas, this mainly targets the National Pension and Basic Pension. However, since the funds that are currently absolutely dependent on government finances are the Government Employees and Military Personnel Pension Funds, there are calls to comprehensively bring these funds to the discussion table.

Yoon Seok-myung, a research fellow at the Korea Institute for Health and Social Affairs (and former president of the Korean Pension Society), pointed out, "The freeze on pension payments to Government Employees Pension recipients over the past five years was lifted last year, causing a sharp increase in deficit compensation. Importantly, despite the Moon Jae-in administration hiring an additional 130,000 government employees who paid extra insurance premiums, deficits still occurred." He added, "Although the increase in government employees may have temporarily reduced the deficit, in the long term, it is a worsening, worst-case scenario." Regarding the slow progress of pension reform, he criticized, "Bureaucrats are direct stakeholders, and many experts participating in discussions are university professors, which protects vested interests."

Yoon, who has advocated pension reform for over 20 years, proposed "pension system integration" as a solution. He said, "Management of each fund should be integrated to make the pension system genuinely uniform. In the process, all excuses for siphoning off funds (such as fraudulent claims) must be prevented, and in the long term, the total financial input will be drastically reduced." However, he emphasized, "Financial integration of each fund is definitely not the goal. The finances should remain separate, but management systems should be integrated so that, based on subscriber criteria, the National Pension, Government Employees, and Private School Pensions are unified."

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