Korean young adults skeptical about viability of National Pension Fund

[Photo by Kim Ho-young]

Nine out of ten South Korean millennials and younger generations express significant concerns about the depletion of the National Pension Fund, according to a survey.

The so-called MZ Generation believes that the National Pension Fund will not adequately serve as a safety net for retirement and, therefore, they intend to actively pursue individual pension plans. Additionally, one out of two respondents supports raising the retirement age to enhance the sustainability of the mandatory provident fund.

The survey, conducted by Maeil Business Newspaper in collaboration with Uppity, targeted 2,778 young adults in their 20s and 30s. In the survey, 95 percent of those in their 20s and 91 percent of those in their 30s questioned the sustainability of the fund, saying that they feel “anxious” about the possibility of the National Pension Fund being depleted.

While discussions on reforming the pension fund system are underway, with a focus on more contribution and fewer benefits, the majority of the MZ generation remains skeptical about the long-term sustainability of the National Pension Fund.

“Even if reforms are implemented to increase the contribution rate and cut benefits, the perception that relying solely on the state pension will make retirement difficult is widespread among the younger generation due to ongoing low birth rates and an aging population,” said a senior official in the financial investment industry.

The negative perception of the National Pension Fund has led to a sense of urgency among young adults to seek alternative retirement preparations by actively participating in individual pension plans.

Reflecting this sentiment, the MZ generation ranked individual pension plans as their top priority for retirement preparation, followed by the National Pension Fund and company pensions. Among respondents in their 20s, 49 percent identified individual pension plans as the most important means of retirement preparation, while among those in their 30s, the figure stood at 49.6 percent. In contrast, only 27 percent of those in their 20s and 30 percent of those in their 30s considered the National Pension Fund to be the most important.

Regarding the management of individual pension plans, the predominant response in the survey was a preference for utilizing stock-based exchange-traded funds (ETFs) and other investment vehicles aiming for higher returns, rather than relying on guaranteed principal savings accounts.