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The government estimates the national pension fund will be depleted by 2060 if no action is taken. But a university professor of statistics, who claims the government is mistaken in its estimation, says the year of depletion will be 2049.
The dispute over the year of depletion is no small matter, given that the trust of subscribers to the national pension program is at stake. The pension program will be put in jeopardy if it is shunned by suspecting young people.
In a paper submitted to a forum on national pension and public finances, professor Park Yoo-sung of Korea University says that the wrong estimate results from the wrong variables the National Pension Service has used in its calculation. Cited among the wrong variables is the fertility rate.
The professor says the rate should be 1.226, instead of the 1.28 that the National Pension Service assumes. According to the Central Intelligence Agency’s World Factbook, Korea’s estimated fertility rate for 2012 is 1.23, which is much closer to the professor’s estimate than that of the government.
He also says that serious statistical mistakes were made in the estimation of longevity as well as fertility when the government reformed the national pension program in 2007, delaying the year of depletion from 2047 to 2060. He accuses the government of being unwarrantedly optimistic.
In response, the National Pension Service acknowledges mistakes in its estimates. But it claims they are not as serious as claimed by the professor. It says that the year of depletion is advanced by just one year to 2059 if the mistakes are factored into a new estimate. It also claims that there are mistakes in the professor’s calculations as well.
But the National Pension Service is well advised to take the professor’s claims seriously and to verify them, if necessary, with the participation of academics and other experts. It will do well to start the process immediately, as it is set to review the finances of the national pension program next year as it does every five years. The findings must be made public.
The National Pension Service will have to solicit public support for a revision of the national pension program if it is deemed necessary. Problems with the pension program must be dealt with as soon as they are found. They will not go away just because the National Pension Service turns a blind eye to them.
The dispute over the year of depletion is no small matter, given that the trust of subscribers to the national pension program is at stake. The pension program will be put in jeopardy if it is shunned by suspecting young people.
In a paper submitted to a forum on national pension and public finances, professor Park Yoo-sung of Korea University says that the wrong estimate results from the wrong variables the National Pension Service has used in its calculation. Cited among the wrong variables is the fertility rate.
The professor says the rate should be 1.226, instead of the 1.28 that the National Pension Service assumes. According to the Central Intelligence Agency’s World Factbook, Korea’s estimated fertility rate for 2012 is 1.23, which is much closer to the professor’s estimate than that of the government.
He also says that serious statistical mistakes were made in the estimation of longevity as well as fertility when the government reformed the national pension program in 2007, delaying the year of depletion from 2047 to 2060. He accuses the government of being unwarrantedly optimistic.
In response, the National Pension Service acknowledges mistakes in its estimates. But it claims they are not as serious as claimed by the professor. It says that the year of depletion is advanced by just one year to 2059 if the mistakes are factored into a new estimate. It also claims that there are mistakes in the professor’s calculations as well.
But the National Pension Service is well advised to take the professor’s claims seriously and to verify them, if necessary, with the participation of academics and other experts. It will do well to start the process immediately, as it is set to review the finances of the national pension program next year as it does every five years. The findings must be made public.
The National Pension Service will have to solicit public support for a revision of the national pension program if it is deemed necessary. Problems with the pension program must be dealt with as soon as they are found. They will not go away just because the National Pension Service turns a blind eye to them.
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Articles by Korea Herald
