"Overlap of Basic Pension and National Pension... Low Effectiveness in Improving Elderly Poverty"

Health and Social Research Institute Report

[Sejong=Asia Economy Reporter Moon Chaeseok] An analysis by a national research institute revealed that overlapping public pension payments to the elderly are not effective in improving elderly poverty rates. It advised improving the functional overlap issue between the Basic Pension and the National Pension to enhance the efficiency of the elderly welfare system.

Im Wan-seop, a research fellow at the Korea Institute for Health and Social Affairs, stated in the report "International Comparative Study on the Effectiveness of Social Security Policies" on the 1st, "Korea's policy effectiveness in reducing elderly poverty was lower than that of the United States and the United Kingdom." According to the poverty reduction rates among the population due to government policies in three countries surveyed by the OECD last year, as of 2017, the rates were 59% in the UK, 33.6% in the US, and 11.7% in Korea. Narrowing the scope to the elderly, the rates were 74.3% in the UK, 59.2% in the US, and 24.9% in Korea. These figures combine public transfer income and tax and social security burdens, showing the efficiency of welfare policies in the three countries.

Researcher Im emphasized the need to improve the efficiency of the elderly income security system. He pointed out that while the UK resolved the functional overlap issue in its "multi-tier old-age income security system" through social consensus in 2014, Korea has not. The multi-tier system refers to a strategy that reduces risk and increases returns through various pension systems, such as "Tier 1 = Basic and National Pension, Tier 2 = Retirement (corporate) pension, Tier 3 = Private pension." The National Pension is divided into an equal portion (income redistribution) and an income-proportional portion (income replacement), and the equal portion overlaps with the Basic Pension. The government proposed raising the Basic Pension benefit level to focus on the basic guarantee function and removing the equal portion of the National Pension, or reducing the Basic Pension to serve as public assistance while maintaining the National Pension's roles of basic guarantee and income replacement as is, but social consensus was not reached.

Researcher Im said, "These two proposals have been issues since the Basic Pension system was designed, but social consensus on how to restructure the two systems has not yet been achieved," adding, "It is necessary to clearly redefine the roles of the Basic Pension and National Pension and simplify their functions so that the elderly income security system does not become an obstacle to citizens' retirement preparation."

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