This paper presents the experience of the Republic of Korea, in setting up a National Pension Scheme (NPS), and assesses its likely effectiveness in coping with future challenges. The Korean NPS has features of both pay-as-you-go system, as it does not have adequate reserves to guarantee the promised annuities, and a fully-funded system, since payments are regularly made into a pension fund which could then be invested. It also has aspects of both public, and private pension systems, public, in terms of the management, and regulation of its coverage, and benefits, and, private, in terms of its financing where the involvement of the central government is limited to subsiding the operational expenses of the management agency, called the National Pension Corporation. The Korean NPS is likely to face future challenges, due to rapid demographic changes, such as the increase in the elderly population, and the reduction of family size due to low fertility rates. These changes are likely to seriously test the viability of the NPS, the coverage of which seems to have expanded too fast, too soon. Two main lessons are drawn: 1) a pension system should be based on accurate financial, and demographic projections, which affect its long-term sustainability, and, 2) it is better to take a gradual approach by starting with a limited coverage, low-benefit package, and, upgrading it over time, in keeping with the performance of the economy.