How Korean pension service can be saved
The South Korean National Pension Service (NPS) is the third-largest national pension fund in the world with US$560 billion in assets. It was founded in 1988 to ensure that all South Koreans after retirement would have a stable source of income. Currently, a certain amount of money is automatically deducted from the salaries of employees and employers as a contribution to the NPS by law.
However, many Koreans worry that the NPS will run out of funds in the near future, which means the current older generations would benefit at the expense of younger Koreans in their 20s and 30s. There have been numerous research papers analyzing at which year the NPS is expected to run out of funds.
For example, an article in The Korea Herald predicted that NPS fund would be depleted by 2057 under the current system as it is expected to post shortfalls starting in 2042 due to the low birth rate coupled with sluggish economic growth. Such alarming reports, combined with a recent announcement that the NPS was considering increasing obligatory contributions from employees and employers, have sparked controversy to the extent that some people say that pension contributions should be optional, not mandatory.
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