New National Pension Service (NPS) Chair Kim Sung-ju said at the inauguration ceremony on the 17th that "the National Pension Service should take on the role of a funding source to supply dwellings at appropriate and reasonable prices." The logic is that if the supply of inexpensive public dwellings eases housing difficulties for young people and newlyweds and promotes marriage and childbirth, it could be positive for pension finances in the long term. Kim cited the Central Provident Fund (CPF) in Singapore as an example.
◇ 90% of Singapore households are "owner-occupied"… structure allows early pension withdrawals to buy a home
Nine out of 10 households in Singapore are said to be "owner-occupied." In addition, 77% of all resident households live in public dwellings built by the Housing and Development Board (HDB). When buying an HDB dwelling, it is common to pay a portion of the purchase price upfront and repay the rest with a long-term mortgage loan. At this time, CPF individual account balances can be used for down payments and loan repayments. It is a structure that allows homeownership without having to put down a large lump sum at once, as in Korea.
For example, suppose a couple in their 30s has a CPF balance of S$80,000 and, as first-time homebuyers, receives S$60,000 in credits from the government. When purchasing an HDB dwelling priced at S$420,000, they pay 25%, or S$105,000, from the CPF and finance 75%, or S$315,000, with a 25-year loan. The monthly repayment would then be about S$1,430 (about 1.64 million won). In this case, principal and interest can also be deducted from the CPF account. However, if CPF was used for the dwelling, when selling the dwelling they must return to their account not only the principal used from the CPF but also the "accumulated interest that would have accrued had the funds remained in the account."
This structure is possible because the CPF is designed as individual account balances that can be withdrawn and used for specified purposes. It is also supported by the fact that about 90% of Singapore's land is state-owned, making it easier to secure sites for and supply public dwellings on a large scale.
By contrast, Korea operates the National Pension Service fund in a pooled manner and most land is privately owned, making a simple transplant of the Singapore model difficult.
◇ Experts say "public dwellings are the job of fiscal policy"… Welfare Ministry says "only Chair Kim's personal view"
As a practical method for the National Pension Service to invest in public dwellings, a "bond investment" is being discussed in which the state or local governments issue purpose-specific bonds for public rental dwellings and the National Pension Service purchases them.
However, this could in effect result in funding fiscal projects through the National Pension Service as a workaround. There are also concerns that it could undermine not only profitability—the first principle of fund management—but also the principles of independence and stability. Another problem is that if yields fall or risks increase in the process of pursuing policy objectives, the burden falls on contributors.
Regarding Chair Kim Sung-ju's inaugural remarks, the Ministry of Health and Welfare said, "It is only Chair Kim's personal opinion and was not coordinated with the ministry."
Yoon Seok-myeong, honorary research fellow at the Korea Institute for Health and Social Affairs (KIHASA), also said, "The supply of dwellings is the job of the government's fiscal policy," adding, "If the goal is to truly help young people, the priority is to reform the system so that the pension will not be depleted when they retire."
Earlier, debates over using the National Pension Service for public investment were repeated in politics in the 2010s, but they repeatedly fell through due to concerns that it could become "the government's slush fund."