Budget for four public pension funds to increase by average 10.8 percent per year 


The mandatory welfare budget is expected to increase by 20 trillion won ($17.9 billion) by 2016, the Ministry of Strategy and Finance said on Wednesday.

The budget, which was 59 trillion won this year, will rise to 62.9 trillion won in 2013; 67.7 trillion won in 2014; 72.6 trillion won in 2015; and 78.8 trillion won in 2016, according to the ministry.

The four public pensions ― the national pension fund, pension fund for public service personnel, pension fund for teachers at private schools and pension fund for soldiers, which take up most of the budget ― are projected to rise an average of 10.8 percent per year.

The budget for the national pension fund will increase from 11.8 trillion won this year to 19.2 trillion won in 2016; the pension fund for public service personnel from 11.1 trillion won to 16.3 trillion won (given that the number of recipients will increase by 4.3 percent per year); and the pension fund for teachers at private schools from 1.9 trillion won this year to 2.6 trillion won. The pension fund for soldiers will also increase from 2.5 trillion won this year to 3.2 trillion won over the same period.

Experts say the reason is the increase in average life expectancy as well as supply and demand.

The mandatory spending budget for the six forms of public assistance, including that for living, accommodation, education and medical costs, will increase by an average 4.2 percent per year from this year’s 7 trillion won to 8.3 trillion won in 2016, given that the number of those qualifying is maintained at 1.43 million and consumer prices are predicted to rise by 3 percent per year.

The mandatory spending budget for health insurance will increase by 8.8 percent per year, from 6 trillion won this year to 8.4 trillion won in 2016. The budget for the elderly will increase from 3.5 trillion won this year to 4.6 trillion won.

Meanwhile, overall government expenditure is expected to increase by an average 4.6 percent per year from 325.4 trillion won this year to 389.7 trillion won in 2016. The percentage of overall mandatory spending budget, including other sectors such as tax money allocated to local governments as well as welfare, will increase from 46.7 percent this year to 51.6 percent in 2016.

Experts expect that the welfare budget will increase even more than the ministry’s estimate as all of the presidential candidates have promised to expand welfare, ahead of the upcoming presidential election in December.

By Park Min-young  (claire@heraldcorp.com)