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south korea, which has a huge national pension fund, warned on wednesday that without urgent reforms, including increasing contributions, new estimates showthe country's pension funds will run out by 2056。

as a background, south korea's government pension fund, called the national pension fund (npf), was established in 1988, and the latest balance at the end of june this year was 114.7 trillion won (about 6 trillion yuan). the scale ranks sixth in the global pension sector and second only to japan in asia.

(source: npf official website)

promoting policy adjustments

lee ki-il, first vice minister of south korea's ministry of health and welfare, warned at a press conference thataccording to the latest financial statistics, south korea's pension fund will peak in 2041 and then quickly run out in 2056.lee emphasized thatwithout reforms, depletion will occur even faster。

although south korea has long estimated that its pension fund will be depleted, the government is emphasizing this issue again now because of the reforms it is promoting.

earlier this month, the yoon seok-yeol government formally submitted a pension reform bill to the national assembly.the core changes include gradually increasing the worker contribution rate from 9% to 13%.if approved, it would be the first change since 1998. lee also warned on wednesday: "now is the best time to carry out pension reforms. any delay will increase the burden on the next generation."

koreans' concerns about pensions began more than a decade ago.

in 2007, the south korean government decided to reduce the pension income replacement rate from 50% to 40% by 2028.many south korean seniors can't 'really start resting' after reaching retirement age。

according to a report by cailian news earlier this week,official statistics from south korea show that the average number of elderly workers aged 65+ has reached 3.94 million, exceeding the 3.8 million young workers (aged 15-29). this is the first time since the country began collecting such data.

ultimately, the pension issue is still a demographic issue. the country is facing a rapidly aging population while also having one of the lowest birth rates in the world. as of 2023, south korea's birth rate has fallen to a staggering 0.72, far below the 2.1 needed to maintain a stable population size.

according to data released by the national statistical office of korea on wednesday, the country's births in july this year reached 20,601, an increase of 1,516 over the same period last year, the highest increase in the same month since 2012. however, the cumulative number of births in the first seven months of this year was 137,913, still a year-on-year decrease of 1.2%.

you have to count on investment

for south korea, it is not realistic to expect a rapid population recovery, but it is still possible to increase the investment return rate of pension funds. thanks to the investment performance of pension management institutions in recent months, the expectation of the depletion of south korea's government pensions has been postponed for one year.

south korea's pension management agency nps released its semi-annual report last week, revealing thatthe fund achieved an initial return of 9.71% from january to june this year, equivalent to earning 102.4 trillion won (about 540 billion yuan)。

by asset class,the highest return rate among south korean pension fund holdings is overseas stocks, which have a return rate of 20.47%, thanks to the strong performance of us technology stocks and the depreciation of the korean won.the return on investment in the korean local stock market was 8.61%.

according to the official holdings pie chart, 34% of south korea's pension funds are invested in overseas stocks, and 13.8% are invested in domestic stocks.

it is reported that in order to promote better returns for pension funds, the south korean government hopes that the fund will increase its exposure to overseas assets and alternative investments such as real estate, infrastructure and private equity funds.