A new chief took office Friday to lead South Korea’s pension fund, but his push to reform the country’s main retirement plan to avoid the depletion of its reserves by 2055 has gained little of the support it needs.
Kim Tae-hyun, a former senior official at the top financial regulator who most recently served as president of Korea Deposit Insurance Corp., faced a delay in getting to work as the union physically blocked him from entering his office, saying Kim was a placeholder underqualified to deal with pension reform.
“I don’t call myself a pension expert but I’m not entirely unfamiliar with pension services,” he told the union, saying he wanted to peacefully resolve the differences potentially preventing him from spearheading a new campaign to start reforms at the National Pension Service.
The NPS, the world’s third-largest pension fund behind those of Japan and Norway with 882.7 trillion won ($647.6 billion) in assets as of June, will see its reserves gone in 2055, according to the latest data from the National Assembly.
How to shore up the retirement plan financially and push back depletion has sharply divided the public, as the younger population increasingly demands to opt out of the program at the prospect of receiving less in retirement benefits than the older group, who rather prefers changes like reduced benefits than dismantling the plan altogether.
Adding to the woes is the record loss the NPS posted recently. In the first six months of this year, the fund logged a loss of 8 percent on investments – mostly local and foreign equities and bonds. The annual loss, the greatest since the fund was established in 1988, had to do with jumpy global markets prompted by Russia’s war in Ukraine and global policy tightening, a NPS official said, noting the fund is currently recouping its losses.
In comparison to global rivals, Korea’s retirement giant has fared better over the same period. The largest sovereign wealth funds in Norway, the Netherlands and the US all reported losses of 11 percent or more, exceeding those of Korea, though losses for Japan’s Government Pension Investment Fund and the Canada Pension Plan Investment Board came to 3 percent and 7 percent, respectively.
Kim, the new NPS chief executive, said he would put priority on fund sustainability, and that structural changes would take place as he listens to not only what his employees have to say, but also the voices of ordinary Koreans.