[Reset Korea] Public Pensions in Crisis — Financial Projections Must First Be Accurate

[JoongAng Ilbo · Reset Korea · September 22, 2025]

Yun Suk-myung, Research Fellow Emeritus at the Korea Institute for Health and Social Affairs (KIHASA) and Chairman of the Pension Reform Division of Reset Korea

Research from the National Pension Research Institute last year drew attention for suggesting that if the existing pension system is maintained, the elderly poverty rate will soar from 37.4% in 2025 to 42.3% by 2050. After it became known that the study was permanently withheld from publication on the grounds of alleged flaws, its contents were recently released following a controversy. Immediately after this controversy, according to the long-term fiscal projection report on social security from the Korea Institute for Health and Social Affairs (KIHASA), the National Pension is projected to have a deficit between revenues and expenditures of 206 trillion won in the year 2050 alone. This phenomenon results from total expenditures of the National Pension surging from 50 trillion won in 2025 to 322 trillion won by 2050. Despite the amendment of the National Pension Act on March 20 after much controversy, all public pensions are projected to be depleted sequentially within 40 years. The Private School Teachers Pension will also be depleted by 2047 as the number of faculty and staff decreases due to the direct hit of low birth rates. For the Government Employees Pension, the deficit between revenues and expenditures relative to gross domestic product (GDP) is projected to be 0.69% by 2060, an increase of 0.36 percentage points from this year. The amount required to cover the Government Employees Pension deficit will be more than double the 10 trillion won deficit subsidy for this year. This is the additional amount added to the 9% contribution for the Government Employees Pension borne by the state as employer.

Liabilities of the four major public pensions exceed 3,300 trillion won; national debt surges due to funding from the national treasury — precise projections are needed instead of optimistic forecasts

Due to the surge in medical expenditures caused by aging, the National Health Insurance is projected to run out of funds within eight years, and Long-Term Care Insurance for the Elderly within five years. I have conducted financial projections for public pensions and health insurance both domestically and internationally at the request of international organizations such as the World Bank, the Organisation for Economic Co-operation and Development (OECD), the United Nations, and the International Labour Organization (ILO). I participated in all financial projections of the National Pension from the first in 2003 to the fifth in 2023, and was responsible for fiscal stabilization measures in all five instances. Based on this experience, the national debt-to-GDP ratio of 173.4% in the '3rd Long-term Fiscal Projection (2025–2065)' announced by the Ministry of Economy and Finance on the 3rd is judged to be a quite optimistic projection.

There are numerous analytical materials that support the claim that this projection is based on a more rosy outlook than reality. First, it must be remembered that the Board of Audit and Inspection raised issues regarding the fact that the national debt-to-GDP ratio for 2060 was underestimated at 81.1% in the '2nd Long-term Fiscal Projection (2020–2060)' from 2020. At that time, the Board of Audit and Inspection viewed the national debt ratio as being more than double that amount. Based on the same 2020 data, the National Assembly Budget Office estimated the national debt ratio for 2060 at 158.7% and predicted it would reach 185.7% by 2070. However, considering that the amendment of the National Pension Act last March was a deterioration that increased the burden on future generations by having the state guarantee payments, the projected national debt ratio of 173.4% for 2065 under the most pessimistic scenario can be seen as being based on extremely optimistic assumptions.

One of the concepts that is difficult for the public to easily understand is unfunded pension liability. Unfunded liability refers to the amount that is insufficient compared to the pension amounts already promised for payment. The unfunded liability of the National Pension estimated by the Pension Future Forum is 2,060 trillion won (84.8% of GDP), while the estimate from the National Assembly Budget Office is 1,820 trillion won. Since the amount of the National Pension already promised for payment exceeds 3,000 trillion won, this means that even if reserves exceed 1,200 trillion won, they are this much insufficient to pay the National Pension. The accrued pension liability of the Government Employees Pension and the Military Pension was 1,312 trillion won as of last year, increasing by 82.7 trillion won in a single year. The unfunded liability of the Private School Teachers Pension is 176 trillion won (as of 2022), meaning each contributor bears more than 500 million won in debt. Even excluding the Basic Pension, which will increase rapidly due to the surge in the older population, the liabilities of the four major public pensions already exceed 3,300 trillion won, even by the most conservative estimate.

Despite this situation, research stating that the elderly poverty rate will reach 42.3% in 20 years if the existing pension schemes are maintained confuses members of our society. This is because it projects that the elderly poverty rate will become higher than it is now, even though expenditures for all public pensions are surging to an unsustainable level. It is time to examine the reasons and background as to why such contradictory contents coexist. At the time the amendment to the National Pension Act passed, the political sphere promised to establish a Special Committee on Pension Reform in the National Assembly to discuss pension structural reform. Even though more than five months have already passed, they have not even been able to form an advisory committee for the special committee. It is time to hurry the discussion on pension structural reform by forming an advisory committee composed of qualified experts. Sustainability is the key to pensions. The more time we waste that should go to structural reform, the greater the burden on future generations becomes.

※ Contributions by external writers may differ from the editorial direction of this publication.

Source: JoongAng Ilbo (original article)