Article 242 Deficit Expected... MZ Generation's National Pension Depletion Fear

Concerns Over Deficits in Four Major Pensions Including National Pension from 2040
Youth Say "Need Assurance That We Will Also Receive National Pension"
Government Prepares Win-Win Pension Reform Plan That Resonates with Youth

[Asia Economy Reporter Han Seung-gon] As analyses suggest that the National Pension Service's financial deficit will increase, anxiety is growing among the MZ generation about whether the National Pension will be depleted. There are also criticisms that the current pension system does not consider generational equity.

The National Pension was introduced in 1988. According to the 2021 Social Survey by Statistics Korea, 67.4% of the population aged 19 and over responded that they are preparing for old age, and more than half of them (59.1%) cited the National Pension as their means of old-age preparation. The scale of the National Pension fund management has surged about 1,800 times from 527.9 billion KRW in 1988 to approximately 948 trillion KRW last year. This means the National Pension has become a major means of old-age preparation for the public.

However, according to the report "Current Status and Future Tasks of Public Pension Reform Discussions" released by the National Assembly Budget Office on the 6th, the National Pension, which is currently recording a surplus, could turn into a deficit if the current low contribution rate and high income replacement rate structure continue.

[Image source=Yonhap News]

The financial deficit of the four major pensions?National Pension, Government Employees Pension, Private School Teachers Pension, and Military Pension?is expected to reach 242 trillion KRW by 2070, starting from 2040. Additionally, an annual deficit equivalent to 6.55% of the Gross Domestic Product (GDP) is projected. The amount of government subsidies paid per recipient of the Government Employees Pension and Military Pension is predicted to reach 17.54 million KRW.

This deficit is expected to expand annually, reaching 10.98 trillion KRW in 2050, 19.84 trillion KRW in 2060, and 24.27 trillion KRW in 2070. During this period, the deficit-to-GDP ratio will widen from -0.13% in 2040 to -3.37% in 2050, -5.64% in 2060, and -6.55% in 2070.

Youth Seek to Alleviate National Pension Anxiety... Call for Improvement in Generational Equity

As the deficit is predicted to increase sharply, anxiety is growing among the 20s and 30s MZ generation that "if the National Pension is depleted, they might not receive benefits." In response, on the 12th, the Ministry of Health and Welfare met with young people to hear their opinions on National Pension reform. At this meeting, the youth emphasized that the government must provide trust that they will be able to receive pensions.

At the '2nd National Pension Meeting for Youth' held in the afternoon at the Korea Health and Medical Information Service's main conference room, university students, office workers, and self-employed youth recommended by civic groups such as "A Welfare State I Make" attended.

A 30-year-old office worker participant said, "The pension system itself is absolutely necessary," adding, "It is important to provide accurate information to increase trust in the National Pension. Despite concerns about the depletion of the National Pension fund, please give us confidence that we will receive pensions." Another participant said, "I think the pension system favors generations who joined in the past," and requested improvements that consider generational equity for all.

Lee Ki-il, 1st Vice Minister of Health and Welfare, stated, "The longer pension reform is delayed, the greater the burden the youth will bear in the future. Pension reform is an unavoidable mission," adding, "We will remember the expectations and concerns of the youth, provide accurate and transparent information, and prepare a pension reform plan for coexistence that the youth can empathize with."

The government has been holding meetings with stakeholders related to the National Pension since August. The 1st youth meeting was held on the 23rd of last month. The government plans to continue holding sessions to gather opinions from citizens by age group and major stakeholders.

Kim Tae-hyun, President of the National Pension Service, said at a press conference marking 100 days since his inauguration on the 5th, "If the fund is depleted, the system will shift from a funded to a pay-as-you-go scheme," adding, "The government will cover the shortfall and pay pensions. Would the government just leave citizens unable to receive pensions?"

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