The National Pension Service (NPS) said the monthly stipend payment will increase by 2.2 percent from this month in reflection of the inflation rate last year.

The pension service also said from July those who earn more than 3.98 million won per month will have to pay 8,000 won more monthly for the retirement pension because the upper limit for the calculation of the monthly premium has been raised.

The Ministry of Health and Welfare announced on March 25 that consumer prices increased by 2.2 percent in 2012, so the monthly pension payment and the retirement insurance monthly payment will be calculated based on that starting this month. The basic monthly pension payment will be increased by 2,200 won per person, meaning that each beneficiary of the retirement pension will receive from 1,000 won per month to 35,000 won per month more per person at the maximum.

With the upper limit for monthly standard income rising to 3.98 million won, the insurance premium paid by NPS will rise to 358,200 won from 350,100, an increase of 8,100 won per month. Around 13 percent of the insurance subscribers, or 2.11 million wage earners, earn more than 3.89 million won monthly and will have to pay 8,100 won more per month from July in insurance premiums.

In the meantime, the NPS will calculate the value of the salaries that the pension subscribers received a decade or two ago based on the current value of the won currency and raise the pension payment on that basis beginning this year. For example, the value of the won today versus 1995 is considered to have increased by 2.078 times, which means that the pension premium paid today should be raised by 2.078 times what it was 19 years ago in real terms.

Those who earned 1.5 million won in monthly salary 20 years ago and paid their pension premium on a monthly basis, will have their pension receipt raised to 535,000 won monthly from 458,000 won based on the salary they received 20 years ago.

South Korea’s national pension fund, the world’s fourth largest, is taking aggressive steps to broaden its portfolio this year, with plans to invest $4 billion overseas in alternative assets such as infrastructure, including several possible investments in the United States.

Faced with supporting retirees in a nation with one of the longest life spans and lowest fertility rates in the developed world, the Korean National Pension Service is looking to boost returns by taking on more risk to prevent a future payment crunch.

“A lot of potential investments are in the pipeline. They will be geographically distributed and sectorally diversified. At least a few investments are being discussed in the U.S.,” NPS Chairman and Chief Executive Officer Jun Kwang-woo told The Wall Street Journal. He declined to name specific targets. 

Chairman Jun is leading a push for the NPS to increase its investment in overseas assets to around 20 percent by 2015 from around 13 percent at the end of last year.

The NPS’s asset base topped 300 trillion won ($268.4 billion) at the end of last year and is expected to rise to around 1,000 trillion won in about 10 years. Part of its problem is that it is already the dominant investor in Korean markets, with nearly 20 percent of the fixed-income market and around 5 percent of market capitalization in the share market.

“We are growing faster than capacity than the local market can offer,” Jun said.

The NPS is also looking for higher returns overseas and has been particularly active in foreign real estate purchases for a few years. Last year it spent around 2.6 trillion won on real estate and infrastructure in several countries, including the 180 billion won purchase of a 12 percent stake in the U.K.’s Gatwick airport and a $1 billion deal with Kohlberg Kravis Roberts & Co. to buy a 23.44 percent stake from Chevron Corp. in Colonial Pipeline, the largest refined-products pipeline in North America. 

Widely considered among the top four pension funds in the world, the NPS is manifesting its full potential as evidenced by the hefty growth of the NPS fund to 333 trillion won ($300 billion) in its total value and the expansive beneficiaries base with over 3.15 million people, both as of the end of April 2012. The company is utilizing these achievements as a springboard to advance its customer service and provide greater welfare benefits to the people, Chairman Jun said.

“In this regard, we are in the process of launching an emergency capital loan program for beneficiaries, while our new policy agenda to get closer to the customers include a systematic post-retirement financial planning service and a high-end benefit payment service.

“Moreover, our new policy focus is shifting to the underprivileged members of society who suffer a wide range of disabilities. As the NPS has been designated as the sole public agency to conduct the mission of disability assessment on behalf of the government, we are ready to provide more practical assistance to the disabled population,” Chairman Jun said.