Last Year, the National Pension Fund Earned a 10.86% Return... 'Falls Short of Major US and Japan Pension Fund Performance'

Comparison of Major Pension Fund Returns by the Budget Policy Office
National Pension Fund Underperforms Other Countries in 1, 5, and 20-Year Periods
Need to Improve Returns by Adjusting Asset Allocation and Overseas Investments

National Pension Service Fund Management Headquarters

[Asia Economy Reporter Naju-seok] It has been found that the National Pension Service's (NPS) fund management returns lag behind those of major global pension funds. There are calls to increase the fund returns to the level of leading global pension funds to ensure long-term fiscal stability.

According to the National Assembly Budget Office's report titled "Evaluation and Analysis of Fund Management of the Four Major Public Pensions" released on the 10th, the NPS's returns were lower than those of major global pension funds. The analysis shows that the NPS's fund management returns over the past 1 year, 5 years, and 20 years were 10.86%, 7.54%, and 6.46%, respectively. These figures fall short of the averages of major pension funds in Japan, Norway, the Netherlands, the United States, and Canada. The average returns of these pension funds were analyzed as 12.69% for 1 year, 9.08% for 5 years, and 6.87% for 20 years. Compared to these averages, the NPS's returns were lower by 1.83 percentage points, 1.54 percentage points, and 0.41 percentage points, respectively.

In particular, last year the NPS appeared to perform well with double-digit returns. However, the 1-year fund management returns in 2021 for pension funds in the U.S., Canada, Japan, Norway, and the Netherlands were 13.28%, 13.66%, 12.62%, 14.51%, and 11.19%, respectively, which were 0.33 to 3.65 percentage points higher than the NPS's returns. Even when looking at 5-year and 20-year returns, the NPS ranked 5th out of the six countries, indicating relatively low fund management returns.

With assets totaling 909 trillion won (based on 2020 financial statements), the NPS ranks third in the world by size, but its returns are lower compared to global standards. Only Japan's GPIF and Norway's GPFG have larger pension funds than the NPS.

The Budget Office explained that the NPS's poor returns are due to "a relatively high proportion of domestic investments, and the low returns in the domestic market in 2021 compared to overseas markets," adding, "While domestic stock market returns were high in 2020, last year the overseas market performed relatively well, resulting in the NPS's fund management returns being lower than those of major global pension funds due to its high domestic investment ratio."

As a way to improve returns, the Budget Office advised that "efforts are needed to gradually achieve fund management returns at the level of major global pension funds through adjustments in the proportions of domestic and overseas investments and asset allocation." In fact, the NPS has a stable bond investment ratio of 42.5%, whereas other pension funds have lower ratios ranging from 24.0% to 38.6%.

A Budget Office official stated, "To ensure the long-term fiscal stability of the NPS, it is necessary to enhance fund management returns to the level of major global pension funds through adjustments in target returns, proportions of domestic and overseas investments, and asset allocation."

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