South Korea: Govt to review social insurance funds for long-term adequacy
Source: Asia Insurance Review | May 2017
The government will, in 2018, draw up mid- and long-term measures to cope with an expected deterioration in the financial health of the country’s key national insurance schemes and major national pension funds, in the face of the country’s rapidly ageing population, the Finance Ministry has said.
The move will start with an integrated assessment of financial estimates of the various funds that are currently made every few years by those managing each respective scheme.
According to government data, eight public insurance schemes, including the National Health Insurance Service, will see their total expenditure reach KRW220 trillion (US$195.9 billion) in 2025, up from KRW106.2 trillion in 2016, reported the Yonhap News Agency.
Funds face fiscal risks at faster-than-expected pace
National Pension Service payments will more than double to KRW44 trillion from KRW18 trillion over the 10-year period as the baby-boom generation, who was born between 1955 and 1963, retires. At the same time, the National Health Insurance will likely operate a deficit in 2018 and its reserves depleted by 2023. The Employment Insurance is also forecast to suffer a deficit from 2020.
“As Korea is suffering from a low birth rate and rapid ageing, the public insurances face fiscal risks at a faster-than-expected pace,” Finance Minister Yoo Il-ho said. “Based on the precise 70-year long forecast, we have to map out a sustainable plan to strike a balance in the public funds.”
South Korea is widely expected to become an aged society in 2018, when the percentage of seniors will reach more than 14% of the entire population, and a super-aged society in 2025 with the proportion rising to 20%. A