Stock rally halts Korea's pension reform debate

A local office of the National Pension Service in Seoul / Newsis

Korea’s national pension reform appears to have been put on the back burner after a strong stock market rally bolstered the National Pension Service’s reserves and delayed the fund’s projected depletion, industry officials said Wednesday.

According to the National Pension Service, its fund reserves rose from 1,036 trillion won ($684.3 billion) at the end of 2023 to 1,458 trillion won at the end of 2025. Market observers estimate that the figure had grown to 1,800 trillion won by May.

The fund’s rise is largely due to the meteoric performance of the benchmark KOSPI, which ranked first among G20 nations in stock market gains. In 2025 alone, the fund delivered a record-high return of 18.82 percent.

Professor Kim Yong-ha of Soonchunhyang University, a former president of the Korean Pension Association, recently told local media that if the fund posts an average annual return of 5.5 percent, its depletion date could be pushed back by 24 years, from 2071 to 2095.

Pension reform has long been considered a key task for presidential administrations, but its political sensitivity has kept governments from resolving it, leaving the issue to be passed on to their successors.

Last March, however, the ruling and opposition parties agreed on a legislative amendment to gradually raise the national pension contribution rate from the current 9 percent to 13 percent, while increasing pension benefits to 43 percent of preretirement income.

After the first parametric pension reform in 18 years, momentum had been building for further talks. But as the National Pension Service’s fund surged, the debate seems to have greatly subsided. The advisory panel under the National Assembly’s special committee on pension reform also wrapped up its work last month.

“The fact that we no longer have to discuss that issue for quite some time is desirable for Korea as a whole, and also very fortunate for the administration,” President Lee Jae Myung said during a press conference marking his first year in office at Cheong Wa Dae on June 8. “It has to be done, but it would come with a huge political cost.”

However, experts say structural reform is still necessary to reduce the long-term fiscal burden.

Public pension spending is projected to exceed 15 percent of gross domestic product in about 60 years, as Korea faces demographic shifts such as low birthrates and rapid aging, according to Park Myung-ho, professor of economics at Hongik University, and Yun Suk-myung, an honorary research fellow at the Korea Institute for Health and Social Affairs.

“The recent surge in unrealized investment gains, driven by booming stock markets at home and abroad, is creating a false sense of security that obscures the pension system’s structural risks,” said Park and Yun, who also served as co-chairs of the special committee on pension reform.

“Korea should not lose sight of the system’s long-term unsustainability amid the illusion of short-term market gains.”