Strain on pension fund ahead as baby boomers age: Report

[Photo by Yonhap]

A recent study warned that South Korea could face a crunch in financing its retiree payouts as payments will outpace contributions by 2027.

The paper released by the National Pension Research Institute on Thursday projects that pension payouts will surge from 45.1 trillion won ($32.7 billion in 2024 to 51 trillion won in 2025, hitting 67.6 trillion won in 2027 and 73.5 trillion won in 2028. Payments are expected to increase by about 7 trillion won per year over the next four years on average but increases in contributions from potential pensioners will remain slower.

Contributions, estimated at 60.7 trillion won for 2024, are projected to rise to only 65.3 trillion won by 2028, a total increase of less than 5 trillion won with the four-year period.

The findings suggest that pension payouts will outpace contributions by 2027 when there will be a gap of 3.2 trillion won between total payouts and total contributions. This is because the country‘s first wave of baby boomers, born between 1955 and 1963, has become eligible for payouts. Those born in 1955 became eligible in 2016, with those born between 1961 and 1963 set to do so in 2024.