(Contributed Article on the Government Employees Pension's Accrued Liability, at Odds with the Pension Future Forum's Position) Professor Baek Jong-seop, Department of Public Administration, Daejeon University (Posted October 4, 2026)

(On the Government Employees Pension's accrued liability,

here is a contributed article taking a position

strikingly different from the Pension Future Forum's, by

Professor Baek Jong-seop of Daejeon University's

Department of Public Administration.

Let us compare the Korean Government Employees Pension and the Finnish civil-servant pension, both of which hold no reserves.

The annual pension accrual rate of the Korean Government Employees Pension will be lowered to 1.7 only in 2035, nine years from now. The current contribution rate is 18%

(9% paid by the civil servant and 9% by the state).

By contrast, the Finnish civil-servant pension

has an annual accrual rate of 1.5,

and because a quasi-automatic adjustment mechanism

called the life expectancy coefficient is applied on top of it,

its effective annual accrual rate

is lower still.

Even so, the current contribution burden

of that Finnish civil-servant pension is

now exceeding 29%.

The Finnish civil-servant pension

case demonstrates that

even if we raised our Government Employees Pension contribution rate

to 30%, 12 percentage points higher than today,

actuarial balance still

could not be achieved.

Although this is what international comparison shows,

the Ministry of Personnel Management,

which is responsible for running the Government Employees Pension,

has, every time the issue of the Government Employees Pension's accrued liability

has flared up,

merely repeated the wordplay that not all of

the accrued liability

is covered by taxes.

And not a few professors

go along with this logic.

As for the government ministries

that have made this argument

and the contributed articles of professors

making the same argument:

in addition to the previously posted

contributed article by Professor Sung Joo-ho of Kyung Hee University,

the contributed articles by

Lee Seung-cheol, Director-General for Fiscal Management at the Ministry of Economy and Finance,

and Professor Jung Do-jin of Chung-Ang University

will be posted separately

in the Archive section

of the Insights category on the Pension Future Forum website.

The time has now come

for a proper assessment

of these arguments

to be made.)

[Special Contribution]

Three Misunderstandings and Truths About the Accrued Pension Liability

(2019.04.02.)

Every year, when the government releases the national closing of accounts, media coverage tends to focus not on the national budget but on the issue of the "accrued pension liability."

Because the sum itself runs to several hundred trillion won, it is understandable that people may worry whether the country will go under because of the Government Employees and Military Pensions.

What is the accrued pension liability? Put simply, it is a figure that calculates, at the present point, the pension costs the state will pay in the future to civil servants entitled to pensions. For serving civil servants it is based on the period they have worked so far, and for retired civil servants and their survivors it assumes the remaining payment period, in order to estimate how much the costs will come to in the future.

Here there is room for three misunderstandings.

First, the size of the accrued liability can change depending on the "discount rate." Because the accrued liability is an estimate about the future, it is necessarily calculated by converting future values into present values, that is, by applying a discount rate. Since it is an estimate covering a long period of more than 70 years, even a slightly lower discount rate causes the accrued pension liability to rise sharply, and the explanation that about 89% of the increase in the Government Employees Pension's accrued liability announced by the government this year was due to financial factors such as the fall in the discount rate bears this out. It means that, other conditions being equal, if the discount rate rises, the accrued liability will also shrink.

Second, the full amount of the accrued liability is not covered by the public's taxes.

The Government Employees Pension is funded in large part by the employee contributions paid by individual civil servants, the employer contributions borne by the state as employer, and other sources. Yet the accrued liability tells us only about the scale of future expenditures and says nothing about future revenues, that is, the scale of employee and employer contributions. For example, if Hong Gil-dong took out a 30 million won loan to buy a car and is able to repay 25 million won from future income, the debt that actually matters would be 5 million won. But if one left out the income and said only that the problematic debt was 30 million won, that could not be called accurate. The accrued pension liability is largely financed by the serving civil servants of each period over the next 77 years, and once we understand this, much of our anxiety can be dispelled.

Finally, there is the question of whether the accrued pension liability is the nation's debt. To state the conclusion first, the accrued liability is a liability in name only; it is not fixed national debt that the state must repay, like government bonds or borrowings.

It is merely an "estimate" in the accounting system, calculated to enhance the transparency and soundness of national finances, and it is entirely different in nature and content from fixed national debt. For this reason, international organizations that compare the financial positions of countries (the IMF and the OECD) do not recognize the accrued pension liability as an official indicator either. In other words, there is no need to feel excessive anxiety.

According to the government, the 2015 Government Employees Pension reform has already saved about 6 trillion won in deficit subsidies over the past three years. It is now time to consider constructive alternatives that can manage fiscal soundness through a more accurate perception and understanding of the accrued pension liability. For example, efforts are needed not merely to track the size of the accrued liability but to make real preparations for growing the fund by steadily accumulating liability reserves, or to rationally improve the calculation method so that it estimates and reports not only expenditures but also future revenues, and publishes the net accrued liability.

Professor Baek Jong-seop, Department of Public Administration, Daejeon University

https://n.news.naver.com/article/014/0004204236?sid=110