When the national pension fund is depleted, it can be maintained until 2120 if the rate of return is increased by 2%p.

National Assembly Budget Office simulation… If you increase it by 1% point, it will run out by 2082.

If 1% of national GDP is invested early, it will be exhausted 2069 → 2100

(Seoul = Yonhap News) Reporter Seo Han-ki = An analysis showed that if the National Pension Service's long-term fund operation rate of return is increased by 2 percentage points (p) compared to the current forecast, it will be possible to maintain a fiscal surplus and prevent fund depletion until 2120.

Even if the government supports 1% of the gross domestic product (GDP) from the national treasury every year starting from 2026, the timing of fund exhaustion will be 31 years later than the current forecast.

According to the 'Financial Outlook by National Pension Scenario' survey and analysis response submitted to the National Assembly Budget Office by the office of Representative Nam In-soon of the National Assembly Health and Welfare Committee on the 30th, it is estimated that if the current system is maintained, the national pension financial balance will turn into a deficit in 2050 and all accumulated funds will be depleted by 2069.

[National pension financial outlook based on government subsidy assumption]

Category Household Financial Balance

Deficit conversion fund exhaustion baseline Current system maintained 2050 2069 Scenario Ⓐ Period average fund management rate of return + 1%p 2060

(+10 years) 2082

(+13 years) Scenario Ⓑ Period average fund management rate of return + 2%p Maintain fiscal surplus in forecast period Maintain fund in forecast period [Source: National Assembly Budget Office]

◇ If you increase the rate of return by 1% point, burnout will be delayed by 13 years… 2%p will be maintained until 2120

The 'current system' that serves as the baseline here is based on the pension reform implemented in 2025.

Following the revision of the National Pension Act, the insurance premium rate, which was previously 9%, is set to gradually increase by 0.5 percentage points (p) each year from 2026 to reach 13% in 2033. The nominal income replacement rate, which is the ratio of the pension amount to be received compared to the average lifetime income after retirement, was raised from 40% to 43% from 2026.

The National Assembly Budget Office's baseline forecast is the result of applying 'insurance premium rate of 13%' and 'income replacement rate of 43%', assuming the median of Statistics Korea's future population estimate for December 2023, and a basic operating rate of return of around 4.6% on average during the forecast period.

Even with the reform of raising the national pension contribution rate to 13%, it is expected that it will be difficult to avoid a deficit in 2050 and fund exhaustion in 2069 due to a decrease in subscribers and an increase in salary expenditures due to low birth rates and aging.

Rep. Nam In-soon's office believed that there were limits to this method of only increasing the subscriber's insurance premium burden, and requested verification by setting up an alternative scenario centered on two axes: improving fund operation rate of return and national financial support.

First, as a result of applying a scenario that increases the fund operation rate of return, if the average rate of return over the period is increased by 1%p, the point of transition to deficit will be delayed by 10 years to 2060, and the time of fund exhaustion will be extended by 13 years to 2082.

If the average rate of return for the period is adjusted upward by 2 percentage points, the surplus continued until 2120, the entire period covered by this financial outlook, and no fund exhaustion occurred.

[National pension financial outlook based on government subsidy assumption]

Category Household Financial Balance

Exhaustion of deficit conversion fund Size of government support Timing of government support Scenario ① 1% of GDP 2026 ~ 2068

(+18 years) 2100

(+31 years) Scenario ② When 1% of GDP turns into deficit

(2050~) 2057

(+7 years) 2078

(+9 years) Scenario ③ When 1% of GDP fund is exhausted

(2069~) 2050

(-) 2070

(+1 year) Scenario ④ 2% of GDP 2026 ~ within the forecast period

Within the expected period of no deficit

Fund maintenance scenario ⑤ Time of 2% deficit conversion of GDP

(2050~) 2071

(+21 years) 2104

(+35 years) Scenario ⑥ When 2% of GDP fund is exhausted

(2069~) 2050

(-) 2070

(+1 year) Scenario ⑦ 3% of GDP 2026 ~ within the forecast period

Within the expected period of no deficit

Fund Maintenance Scenario ⑧ Time of 3% deficit conversion of GDP

(2050~) within the forecast period

Within the expected period of no deficit

Fund maintenance scenario ⑨ When 3% of GDP fund is exhausted

(2069~) 2050

(-) 2072

(+3 years) [Source: National Assembly Budget Office]

◇ ‘Timing’ is the key to government support… When used after exhaustion, the extension effect is only 1 year.

In the national treasury support scenario where government finances are directly invested, the ‘timing of support’ was confirmed to be a decisive variable as much as the amount of support. If 1% of GDP is provided to the national treasury in advance every year from 2026, the compound interest effect of fund operation will accumulate, and the deficit transition will be extended by 18 years to 2068, and the fund exhaustion point will be postponed by 31 years to 2100.

On the other hand, if 1% of GDP is invested from 2050, after the household budget turns negative, the transition to deficit will be delayed by 2057 and fund exhaustion will be delayed by only 7 and 9 years, respectively, to 2078. In particular, if 1% of GDP was belatedly invested in 2069 when the fund ran out, the timing of the transition to deficit would be no different from the previous year of 2050, and the timing of fund exhaustion was also extended by only one year to 2070.

If the amount of government support is expanded to 2% of GDP, if it is invested early from 2026, there will be no deficit until 2120 and the fund will be fully maintained. Even if it is invested starting from 2050, when a balance deficit occurs, the deficit conversion will be delayed by 21 years to 2071, and the exhaustion point will be extended by 35 years to 2104. However, if support was provided in the form of ex-post medicine from 2069, when it was depleted, the extension effect would be only one year.

In the scenario of supporting 3% of GDP, if the funds were invested from 2026 or 2050, the point of deficit, the fund could be maintained without deficit until 2120. However, if used from the point of exhaustion in 2069, the lifespan extension effect was only 3 years.

Rep. Nam In-soon's office said, "This analysis clearly shows that in order to secure the sustainability of pension finances, in addition to increasing insurance premiums, we need to quickly discuss measures to improve returns through active fund management and to inject national treasury as priming at an early stage when there is room in the treasury."

Meanwhile, the National Assembly Budget Office added that this response is a simulation result prepared based on the request and assumptions of Rep. Nam's office, which requested the analysis, and is not an official opinion of the National Assembly Budget Office.