Editorial Another two years earlier, the national pension depletion… The current generation must make concessions and suffer the pain

The 5th National Pension Financial Estimate, released by the Ministry of Health and Welfare, was filled with dark as worrying indicators. The key point is that the deficit will start from 2041 and the fund will be completely depleted by 2055. Compared to the 4th estimate in 2018, just five years ago, fund exhaustion has been brought forward two years and the deficit turned into a deficit of one year. A frustrating conclusion was reached that the insurance premium rate, which is currently 9%, should have more than doubled to 19.57% by 2025 in order to prevent it from turning into a deficit.

This is a calculation based on fairly optimistic assumptions about the birth rate, aging population, economic growth rate, and inflation rate. The Ministry of Health and Welfare assumed a situation where the total fertility rate of 0.73 will rebound from 2025, rise to 0.96 in 2030 and 1.21 in 2046, and then stabilize. The possibility that the fertility rate, which has been plunging to the point where it is difficult to find a parallel, will rebound from just two years later, seems unrealistic. At the time of the 4th fiscal projection five years ago, the fertility rate this year was expected to be 1.27, but in reality it is only 0.73. The idea that the speed of aging is too conservative is ahead of us. Life expectancy this year, expected to be 83.9 years five years ago, is also much higher at 84.3 years.

The reality is that the movement of the macroeconomic indicators also shows a large gap with the forecast. The inflation rate between 2023 and 2030, assumed to be 2% per annum five years ago, has been raised slightly to 2.2% in this estimate. However, as the first global inflation in 40 years suggests, it is very likely to increase as many experts believe that ‘the era of low prices is over’. The predicted economic growth rate for the same period, which was 2.2% per annum, was also reduced to 1.9% in five years, but it is doubtful whether this can even be achieved.

Ultimately, there is no choice but to increase doubts that even the dizzying timetable of ‘depletion of funding by 2055’ is not an empty expectation. The institutional support ratio (the number of recipients compared to the number of subscribers), which is 24.0% this year, is expected to rocket to 62.9% in 2040, 95.5% in 2050, and 125.4% in 2060. It means that the generation under 40, who only pay for money and benefits, have to pour their income into the old age of the elderly, who have a numerical advantage. It is also calculated that future generations must pay at least 30% of their income as insurance premiums if the fund is depleted and converted to a ‘pay-as-you-go’ method, where expenses are covered by income on for the current year. .

What the National Pension Service needs most now is the responsibility of the older generation. Despite the expected conclusion of ‘depletion’, the insurance premium rate is pegged at 9% for the 25th year. Since the Roh Moo-hyun administration lowered the benefit rate (60% → 40%) in 2007, reform has been neglected for 16 years. The previous Moon Jae-in administration wasted all five years with political interests at the fore. The answer is clearly out there. The current generation that bears more of the burden is the only option left. Also, disaster is inevitable if some kind of pyogyesan and josammosa are introduced.