The national pension fund could run out of money by 2058 if current financial conditions continue, two years earlier than previously projected by the government, according to a research publication.
The paper from the Korea Institute for Health and Social Affairs (KIHASA) predicts that the government run National Pension Service (NPS) will start running a deficit from early 2040s after hitting the highest reserve of KRW1,576.9tn ($1.41tn) at current value in 2041 before depletion in 2058, reports Yonhap News Agency.
The estimates were drawn based on trends shown in pension subscriptions and beneficiaries, insurance payments, average income of subscribers and unemployment rate, plus other factors.
The government conducts reviews on the financial soundness of the NPS every five years, with the latest one currently under way. The prior review in 2013 predicted the pension money may run out in 2060 after peaking in 2043 at KRW2,561tn at current value.
The paper said if the current pension collection rate is not raised and the payment amount remains the same, the cost of pension subscription may have to be hiked by 26.3% in 2058 and 27.4% in 2060 to sustain the system.
The proportion of pension payment to GDP, measured at 1.1% in 2016, is expected to jump to 2.1% in 2030, to 3.8% in 2050 and hit 4.3% in 2060, according to the study.
South Korea's low birthrate will start reducing the number of pension subscribers, the study said, from 21.25m in 2016 to 17.47m in 2030 to 11.62m in 2060. The number of pension recipients, however, will rise steeply from 4.39m in 2016 to 8.4 million in 2030, 15.38m in 2050 and 16.99m in 2060, it projected.
The dependency ratio of pension subscribers to recipients will consequently rise from 16.1% in 2016 to 47.3% in 2035, 104% in 2055 and 118.5% in 2060, the paper said