Pension fund in deficit for past 6 years

The National Pension Fund marked its sixth consecutive year in a deficit as the number of pensioners and pension payment increased further, reported the National Statistics Office (NSO).

In 2006, pensioners received on average 1.6 times more than the amount paid to the fund in fees by a worker. That amount increased to 4.8 times in 2016, contributing to the widening deficit of the fund.

The number of pensioners and the payment to each pensioner has been steadily increasing while the amount of workers paying fees to the fund have not been on par with the aforementioned increases.

The NSO has recommended that the retirement age be modified depending on the revenue and expenditure of the pension fund in order to alleviate the deficit that has accumulated over the years.

The Social Insurance Fund, which finances the pension fund, saw a revenue of 2.1 trillion MNT in 2017, almost a nine-fold increase since 2006. Expenditure reached 1.9 trillion MNT, 9.5 times more than the amount in 2006. The number of workers paying a social insurance fee increased to one million in 2017, 2.2 times more than the amount in 2006, meanwhile the amount of pensioners reached 388,300.

While the NSO has recommended the retirement age to be modified in order to address the deficit, some have suggested shifting the pension fund into an investment model. All of the largest pension funds around the world including the world’s largest, the United States Federal Old-age and Survivors Insurance Trust Fund, all invest in various ventures for its revenue. The US Federal Old-age and Survivors Insurance Trust Fund is the world’s largest public pension fund with an estimated 2.743 trillion USD in assets.

While Mongolia has ratified legislature concerning investment-based pension funds over the years, the state-owned Social Insurance Fund has yet to modernize and maximize its revenue potential.