A new survey conducted in South Korea has found that a significant number of young people aged 20-39 are losing faith in the national pension system, with over three-quarters stating that they do not trust state-issued pensions. Many of these individuals are turning to alternative methods to build their retirement funds, with over half of respondents making their own pension plans opting for investments in stocks and crypto. The survey, conducted by the Korea Women’s Policy Institute, interviewed 1,152 individuals in their 20s and 30s, revealing that almost 90% of respondents were concerned about rising insurance premiums due to the country’s low birth rate.
South Korea has the lowest birth rate in the world, with the country posting a new record low of 0.72 children per woman in 2023. This demographic trend has raised doubts about the National Pension Service’s ability to pay pensions in the future, as the older population already outnumbers the younger generation. Over 86% of respondents expressed concerns that the amount of money they would receive from the NPS in the future would be insufficient, with 83% fearing they would not receive any state national pension due to the depletion of the NPS fund. As a result, many young South Koreans have started looking beyond the NPS for retirement plans, with more than half opting for investments in stocks, bonds, funds, and cryptoassets.
Young South Koreans have shown a strong interest in crypto investments, with data indicating a significant increase in crypto buys from customers aged 20-39 between 2020 and 2022. Financial experts in South Korea suggest that for young people, investing in crypto is no longer optional. However, the rise in crypto adoption among young individuals has also led to negative consequences, as evidenced by an increase in pre-bankruptcy rehabilitation claims among those aged 20-29. The Seoul Bankruptcy Court has attributed this rise in claims to the growing trend of crypto investment and stock market purchases among young people, leading to a 31% year-on-year increase in rehabilitation applications.
The concerns about the national pension system and the increasing interest in alternative investment options among young South Koreans highlight a larger issue related to retirement planning in the country. With the demographic imbalance resulting from the low birth rate, coupled with doubts about the sustainability of the NPS, young individuals are seeking alternative ways to secure their financial future. While investments in stocks and cryptoassets have become popular choices for retirement planning, the risks associated with these investment options underscore the importance of financial literacy and careful decision-making in managing retirement funds.
As South Korea grapples with the challenges posed by an aging population and declining birth rate, the government and financial institutions will need to address the growing concerns about the national pension system and provide support for individuals seeking alternative retirement planning strategies. Encouraging financial education and promoting a diversified approach to retirement savings could help young South Koreans navigate the uncertainties of the future and achieve their long-term financial goals. Ultimately, building trust in the pension system and promoting sustainable investment practices will be crucial in ensuring the financial security of the younger generation in South Korea.
