Exactly.

In the current pension system (at least the ones in the Nordics), the new generation pays for the old generation. This mechanism is broken, as it expects (as you pointed out) an ever-growing population, which is of course unrealistic.

Fixing [*] the broken pension system in a sustainable way is politically unpalatable and seems to have been so for decades. Lifting the pension age is the only "innovative" action available that is even discussed nowadays anywhere in public, as if that were the only viable alternative, which of course it isn't.

I've pondered why. Hammering out the details of a new system and taking care of a transition period etc. cannot be unsurmountable problems. It probably has to do with pensioners being a large voter demographic, thus the reason is some form of political self-preservation on behalf of the traditionally large parties.

So, instead of changing things to the better, a broken system must be maintained. Since the system is not only broken, it's essentially untouchable, therefore political decision-taking has to accept possibly sub-optimal decisions in related areas to avoid disturbing anything. In a way, the brokenness leaks.

Then, a shrinking population only exacerbates the problems of the pension system, spreading the brokenness further into other societal systems and decisions. And that's a bad path to be in.

[*] In an example of a better-working alternative system, any pension contributions would be personal, kept in an account managed by the state. The money is (low risk) invested by the state, profits/dividends reinvested, etc. Once one becomes a pensioner, the money can be withdrawn in whole or parts. Add taxes somewhere, such as when withdrawing the money. The state guarantees the lowest level of pension, something like today. Simple enough, and not tied to "children pay for parents".

Edit: formatting