South Korea’s Welfare Ministry is planning to turn the National Pension Service’s fund management unit into a separate public firm as part of its plan to revamp the pension program amid rapid population aging.

According to the Health and Welfare Ministry, the state-run Korea Institute for Health and Social Affairs will announce the plan for restructuring the governance of the state pension program on Tuesday.

The plan to spin off the fund management division is aimed at tackling the pension program’s funding problem. As the average age of the Korean population continues to rise, the fund for the pension program is widely expected to be depleted by 2060.

The national pension fund currently has around 480 trillion won ($418 billion), and is expected to peak in 2043 at around 2,561 trillion won.

Widespread concern over the pension fund’s resources has also sparked an ongoing debate about the income coverage of the pension program. Currently it covers around 40 percent of the subscribers’ preretirement income as the monthly payment, but the main opposition said it needed to be raised to 50 percent. The Welfare Ministry said subscription fees would need to double for this to happen.

The ministry believes that dividing the fund management unit will allow it more autonomy, while remaining under the supervision of the NPS. The officials hope the liberty will encourage the newly founded entity to actively make investments with its funds for profit.

Among other key points of the plan is establishing a permanent committee on fund management.

There have been complaints that members of the existing fund management committee cannot hold extensive discussions on improving the program because it is a nonpermanent body. The committee is currently headed by the welfare minister, and is comprised of five government officials and 14 minister-appointed civilians.

The officials also seek to elevate the status of the national pension program’s review committee -- currently presided over by the vice welfare minister -- by mandating it to be led by the welfare minister.

By Yoon Min-sik
(minsikyoon@heraldcorp.com)