Posted February. 28, 2005 22:40,
The National Pension Fund may dry up by 2042, which is five years faster than the governments forecast, if the current trend continues.
When the fund becomes exhausted, people in their 20s and 30s at present will not receive it when they retire. So experts point out that the current pension system, in which participants pay less and get more, should be addressed.
Supposing that the yield on the pension fund is 4.5 percent, the fund is projected to go into the red from 2031 before being exhausted by 2042, according to a report, Fund Risk Management and Improvement of Fund Spending Structure published by the Korea Development Institute (KDI) on Monday at the request of the Ministry of Planning and Budget.
The National Pension Fund Development Committee led by the Ministry of Health and Welfare projected in 2003 that the pension fund will go into the red from 2035 and completely run dry by 2047, and the government is carrying out the pension fund reform measures based on the estimation.
The different outlook for the pension fund is because the institutions have a contrasting prospect on the pension yield.
The committee forecasted that the yield would remain at 7.5 percent annually by 2010 before gradually going down to five percent after 2050.
The KDI, on the contrary, said that the yield would be 4.5 percent annually, reflecting the current low interest rate on the calculation.
The yield on the pension fund stood at 5.89 percent last year due to the fall in interest rate.
The report pointed out that the structural imbalance of the National Pension Fund should be addressed by grasping the income of pension participants and establishing the right accounting principle.
In order to take in the income of the self-employed properly, the report proposed reducing the special tax system for value added tax and eliminating simplified tax while introducing private insurance accounting principle to the National Pension Fund.