A recent survey conducted in South Korea has revealed that a majority of young people aged 20-39 have lost faith in the national pension system. Over three-quarters of respondents stated that they do not trust state-issued pensions, with many opting to build their retirement funds through investments in stocks and cryptocurrencies. The survey, conducted by the Korea Women’s Policy Institute, found that concerns about rising insurance premiums due to a declining population were a primary factor in this lack of trust in the pension system. With South Korea having the lowest birth rate in the world, there are growing concerns about the sustainability of the National Pension Service (NPS) in the future, as older populations outnumber younger ones.
The survey also revealed that over 86% of respondents believed that the amount of money they would receive from the NPS in the future would be insufficient, and 83% were concerned that the NPS fund would be depleted, leaving them with no state national pension in retirement. While the majority of respondents had not made any retirement plans outside of mandatory national pension contributions, a significant number were already looking beyond the NPS for their retirement plans. Many were opting for a mix of cash savings and personal pension programs, but over 52% were investing in stocks, bonds, funds, and cryptoassets as a means of securing their future financial stability.
Younger South Koreans, in particular, have shown a strong interest in crypto investments, with a significant increase in crypto buys among customers aged 20-39 in recent years. Financial experts in South Korea suggest that for many young people, investing in crypto is no longer optional. However, as faith in state pensions dwindles and crypto adoption increases among young people, there is a concerning trend of rising pre-bankruptcy “rehabilitation” claims among individuals aged 20-29. The Seoul Bankruptcy Court has attributed this rise to increased investments in crypto and the stock market, with a 31% year-on-year increase in rehabilitation applications.
The declining birth rate in South Korea has prompted some businesses to offer generous incentives to encourage their employees to have children, in an effort to address the demographic challenge. With the overall birth rate hitting a record low and projected to decrease further in the coming years, there are growing concerns about the sustainability of social security systems like the National Pension Service. The increasing reliance on alternative investment options like stocks and cryptoassets among young South Koreans reflects a shift in confidence away from traditional pension systems towards more self-directed retirement planning.
In light of these findings, policymakers and financial institutions in South Korea may need to reassess the sustainability and effectiveness of the current pension system to address the concerns of the younger generation. Encouraging financial literacy and responsible investment practices among young people, while also ensuring the stability and adequacy of social security programs, will be crucial in addressing the growing trend of distrust in state pensions and the rise in alternative investment options like cryptoassets. As South Korea grapples with the challenges of an aging population and declining birth rates, finding innovative solutions to ensure the financial security of future generations will be essential in securing a stable and prosperous retirement landscape.
