Assets managed by NPS reach 700 trillion won

Total assets managed by the country’s state pension fund surpassed the 700 trillion won ($596 billion) mark three decades after its launch, according to the National Pension Service (NPS) Monday.

The pension operator said its assets were 701.2 trillion won as of Thursday, equivalent to 37 percent of the country’s gross domestic product.

That figure represents a 62.4 trillion won or 9.8 percent increase from the end of 2018. The size of the pension fund has grown from just 530 billion won when it was founded in 1988 to over 100 trillion won in 2003, 300 trillion won in 2010 and over 500 trillion won in 2015.

The annual average rate of return for one of the world’s major investors stood at 6.81 percent in April, with the cumulative rate of return since 1988 standing at 5.4 percent.

Since its launch, the NPS has earned 337.3 trillion won from managing the fund.

The NPS said that while its annual earnings reached 41.2 trillion won in 2017, it posted a loss of 6 trillion won last year, affected by an intensifying trade dispute between the United States and China, and tough financial market conditions.

Due to the country’s rapidly aging population requiring larger payouts, the pension fund could start recording losses in 2042 if the fund maintains its current contribution level at 9 percent.

Concerned about a possible depletion of the fund, the NPS has suggested that the government raise the contribution rate to 11 percent or 13.5 percent over 10 years.

The Ministry of Health and Welfare also proposed a set of reforms including pushing up the contribution rate to 12 percent and the replacement ratio - the percentage of a worker’s pre-retirement income paid out after retirement - to 45 percent.

The discussion, however, has been put on hold as the National Assembly is logjammed with pending bills.

BY PARK EUN-JEE, YONHAP [park.eunjee@joongang.co.kr]