The National Pension Service (NPS) will be able to pay annual pensions on the same level as advanced countries in 2050 by maintaining the current pension payment system.
According to the data of both the Ministry of Health and Welfare and the Organization of Economic Cooperation and Development (OECD), Korea’s pension entitlement and basic pension payment rate would be around 3.82 percent of GDP in 2030, and increase rapidly to 7.93 percent of GDP in 2050, showing that a rapidly aging population would boost pension payments without income replacement.
The current pension system was launched in 1988 and had to be revised in 2007. Now pension experts combine the national pension and basic pension payment when comparing them with those in advanced countries.
The most recent OECD data , which was compiled in 2009, shows that the pension payment amounted to 7.8 percent on average for its 34 member countries. The fact that the pension systems in some OECD nations are 60 to over 100 years old and Korea’s pension ratio will be 7.93 percent in 2050, even though its only 62 years old, shows Korea’s caught up with advanced countries rather fast. For example, Great Britain, whose national pension service started in 1908, amounts to 6.2 percent of its GDP; Canada’s, launched in 1927, amounts to 4.5 percent of its GDP, while the U.S. national pension payment, launched in 1935, comes to 6.8 percent of its GDP.
Germany’s national pension service system, the oldest in the world, was launched in 1889. It comes to 11.3 percent of its GDP, while that of Japan, which started in 1959, makes up 10.2 percent of GDP.
Furthermore, fund is administered by the Minister of Health and Welfare and serves all of the national pension programs, as its policies are approved by the National Pension Fund Management Committee, which represents balance between employees, management and citizens, the highest governing body of the fund management.
Meanwhile the fund is managed solely by the National Pension Service which runs the Fund Investment Office in order to enhance the effectiveness and efficiency on implementation of investment policies. Therefore, we manage with latitude under commitment by the minister.
The NPS invests only after due consideration of risk so as to generate a better return in the long term. Hence, the NPS takes systematic and coordinated steps to measure and manage risk. It thoroughly recognizing potential risks incurred by in activities related to fund management.
The NPS adopts an enterprise-wide risk management approach, including rigorous review processes by the risk management committee, which is chaired by the CEO and composed of majority-outside members such as financial and legal experts. No doubt, multi-layered audit and performance assessment procedures, in terms of risk management framework, boosts the validation and credibility of NPS activities.
Meanwhile, the NPS said its 2014 corporate social responsibility reports were awarded the gold prize in the areas of CSR and sustainable management at the 2013-2-14 Vision Awards hosted by the LACP, a world-renowned marketing research firm.
The NPS also announced on Jan. 5 that it sold the HSBC headquarters building in Canary Wharf in London to the Qatar Investment Authority, a sovereign wealth fund, to gain 96 billion won, including dividends of 419 billion won, from the sale. The NPS bought the building in 2009 and was able to reap 1.6 times the investment it made in five years with a net internal rate of return of 12 percent.
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