According to a government estimate, the national pension fund will begin to suffer a deficit in 2044, as the sum of benefit payments is projected to surpass that of contributions and other revenues for the first time. The government says the pension fund will be depleted by 2060 if no action is taken to stop the hemorrhaging.

This projection is little different from that made in 2008, which means that the previous Lee Myung-bak administration made no progress in improving the soundness of the pension fund during his five years in office.

As the Ministry of Health and Welfare says, depletion does not mean an end to pension payments. The ministry sounds irresponsible, however, when it says the government will be required to subsidize pension payments with taxpayers’ money if the pension fund is depleted, as is the case in many other countries. But why should the coming generations shoulder the burden of helping pay pension benefits for the older generations?

The pension fund is projected to peak at 2,561 trillion won in 2043 (at the 2010 constant price of 1,084 trillion won) ― an amount a little larger than the 2008 projection of 2,465 trillion won. The pension fund, which was equal to 31.6 percent of gross domestic product last year, will rise to the highest level of 49.4 percent of GDP in 2035.

But the pension fund may be in worse shape than projected by the government, given a claim by a university professor, who said last year that the fund would be depleted by 2049. The difference resulted from the different fertility rate estimates of 2012.

Changes in the fertility rate, one of the most important variables in making pension-related projections every five years, will determine at what level the premium should stand as a percentage of monthly income. Assuming that the fertility rate will rise from 1.23 in 2020 to 1.42 in 2040 and remain at the level thereafter, the premium is projected to increase to 22.6 percent in 2070 and 22.9 percent in 2080.

Should the fertility rate rise to the replacement rate of 2.1 in 2035 and continue to stay at that level, the government says, the premium will decline to 17.3 percent in 2070 and 15 percent in 2080. As the government says, the pension program’s fiscal sustainability will depend to a great extent on a population policy geared to increasing the fertility rate.