National Pension Service’s fund assets exceed 1,000 trillion won

The fund assets of South Korea’s National Pension Service (NPS) exceeded 1,000 trillion won. It has been 35 years since the national pension system was first introduced in 1988.

According to the NPS Investment Management on Wednesday, the fund assets exceeded 1,000 trillion won on September 15 for the first time since its introduction – at 1,001.8 trillion won. It is the third pension fund in the world to exceed such an amount, following Japan’s Government Pension Investment Fund and Norway’s Government Pension Fund.

The NPS began accumulating its reserve since it was introduced in 1988. Following the establishment of the NPS Investment Management in 1999, the pension’s investment expertise was strengthened, accelerating the speed of fund increase. It took only eight years for the fund assets to increase from 500 trillion won in 2015 to 1,000 won. If the current pension collection conditions are maintained, it is expected to reach 1,755 trillion won by 2040. However, the size of the fund assets is expected to reach its peak in 2040 and begin to decrease if the current insurance rates are maintained due to decreasing populations, etc.

Experts say that insurance rates should be increased, as well as the return on investment, to prevent the depletion of the national fund. The NPS is expanding its investment in risky assets, such as foreign stock and alternative investments, in the mid- to long-term to diversify its investment portfolio.

The accumulated profits of the NPS recorded 451.3 trillion won from its establishment in 1988 until last year, with an annual average cumulative margin of 5.11 percent. The operating margin from January to July this year is estimated to be 9.74 percent, which is 14.43 percentage points higher than the same period last year. As the global inflation and interest rate rising trends eased from early this year until July, the return rates from stock and bond investment improved. The money-weighted rates of return recorded 20.68 percent for domestic stock, 19.07 percent for foreign stock, 2.92 percent for domestic bonds, 3.98 percent for foreign bonds, and 3.40 percent for alternative investment.


dhlee@donga.com