Policy Reserve for Public Pensions Falls 182 Trillion Won Short

The Board of Audit and Inspection (BAI) recently found that the policy reserve for public pensions—the amount accumulated in advance to ensure the consistent future disbursement of pensions for those working in the public sector, including government officials, military personnel, and private school teachers—is running disastrously short, by a margin of some 182.3827 trillion won.

The BAI announced the above findings on July 18 after inspecting the operation of four principal public pension systems from May through November of 2003. The BAI further remarked, “Despite this alarming state of affairs, neither the definition of policy reserves nor their computation standards have been properly established.”

According to the findings, policy reserve deficits as of late 2002 come to 154.1704 trillion won for government officials, 11.3664 trillion won for private school teachers, and 16.8459 trillion won for soldiers.

A BAI official said, “The national pension, which is one of the four principal public pension systems, was excluded from this round of inspections, as legislation for radically revising the system to guarantee long-term financial stability by 2070 is currently underway.”

However, even the national pension fund will be in the red by 2036 if the present system is not rectified, and could even be depleted by 2047, warned the BAI.

The BAI notified the ministers of Government Administration and Home Affairs, National Defense, Education and Human Resources Development, and Planning and Budget to “prepare a concrete plan for the future stability of the pension system through intensive policy consultation,” stressing that “the accumulation of the policy reserve is essential for mitigating the financial burden, not only of the government, but also of future generations.”

Hyong-gwon Pu bookum90@donga.com