A model to support the young generation by combining mortgage finance and policy pension programs

Establishing a supplementary pension system to support young people is necessary when distrust in the national pension is increasing due to discussions on national pension reform and concerns about the depletion of funds. Simultaneously, a comprehensive support plan to improve young people’s access to home ownership amid high housing prices is needed. To this end, this study presents a model combining mortgage finance (traditional and reverse mortgages) and policy pension programs to support homeownership and retirement income for young people. The model we propose has a policy effect similar to that of the current policy finance system, which provides low-interest loans to young people to purchase houses. However, instead of this type of support, a portion of the repayment amount is transferred to retirement pension funds for youths. The model is a subsidy program that allows young people to save money in an account and use it as a living fund for retirement. This can be considered a more desirable policy direction for securing the younger generation’s retirement income than simply providing low-interest loans to them. The model was evaluated to potentially increase the income replacement ratio of total pension benefits by up to 11.8 percentage points, depending on the size of the mortgage loan.