The main opposition The Minjoo Party of Korea is pushing to divert funds from the state-run National Pension Service to build low-cost rental apartments for young people and child care centers to boost the nation’s low birth rate.
The party launched Monday a large-scale special committee to promote the scheme, showing its determination to tap into the 520 trillion won pension fund ($446 billion) to finance its welfare projects.
The committee consists of 13 lawmakers and 10 experts invited from outside the party. Its mission is to formulate a coherent policy backed by detailed implementation plans by November. The party plans to present it as a major campaign promise for the 2017 presidential election.
The party initially brought up the scheme in the April general election. At the time, it promised to take out 10 trillion won each year for 10 years from the NPS and invest the money in long-term rental apartments and nurseries to cope with the demographic crisis facing Korea.
Kim Chong-in, the party’s interim leader, asserted that providing low-cost housing to young couples and improving the quality of child care would be the best way to address the woeful childbirth problem.
He further argued that a rise in the nation’s fertility rate would also help stabilize the national pension fund, as a continued rise in pension beneficiaries due to rapid population aging without a corresponding rise in pension subscribers due to a low birth rate would accelerate the depletion of the fund.
Kim’s argument may make sense, but the problem with the party’s scheme is that it could make a big dent in the pension fund’s assets, as investment in low-cost rental apartments and child care facilities does not offer high returns.
Kim said the party’s plan would not erode the NPS assets if the return on investment in housing units for young couples exceeded 5 percent.
Yet such a high earnings rate cannot be expected from public investment in low-cost apartments and child care centers. The average return on the fund’s investment in welfare-related projects during the past five years is minus 1 percent. The fund’s overall rate of return was 4.6 percent last year.
The NPS is an important source of income for ordinary people’s retirement. It allocates its assets in compliance with the investment policy established by a team of top-notch investment experts. Political parties should not attempt to intervene in its investment policy. If the opposition party wants to tap into the fund, it should first win consent from NPS subscribers.
