The Effect of Social Investment on the Sustainability of Korea National Pension Fund

Currently, Korea’s National Pension Plan is the third-largest public pension in the world. According to its financial projections from 2013, the Pension fund’s accumulated amount is expected to reach its highest point — as much as 50% of the nation’s GDP by 2043. However, experts predict that this immense fund will eventually be exhausted by 2060 due to Korea’s aging population and low fertility rate. In this paper, we develop an optimization model to calculate the effect of an investment in raising the national fertility rate on the Pension Plan. In addition, with an asset-liability management model, we examine if the investment in raising the fertility rate can improve the overall sustainability of the National Pension Fund. We show that under some conditions, the investment in raising the fertility rate enhances the National Pension Fund’s sustainability. We therefore, conclude that an investment in population growth is potentially a feasible investment option for the National Pension Plan.