"Aging is fastest... Pension barely covers half of retirement living expenses"

Hankyungyeon Survey on Pension Receipt Status of Elderly in Korea and Japan

Data provided by Korea Economic Research Institute

[Asia Economy Reporter Kim Heung-soon] South Korea is experiencing the fastest aging population growth in the world, but it lacks adequate measures for old-age security, leading to serious concerns about elderly poverty.

The Korea Economic Research Institute (KERI), under the Federation of Korean Industries, commissioned a survey through the polling agency Mono Research targeting elderly populations aged 65 and over in both South Korea and Japan. The results revealed that the average pension amount received by individual households in South Korea is 828,000 KRW per month, which is only 50.4% of Japan’s 1,644,000 KRW, according to a report released on the 15th. Notably, the appropriate living expense level perceived by South Korea’s elderly was 1,725,000 KRW per month, indicating that actual pension income covers only 48.0% of the appropriate living expenses.

South Korea’s Aging Speed Twice That of Japan
Public and Private Pension Monthly Benefits at Half of Japan’s Level

Over the past decade, South Korea’s population aged 65 and above has increased at an average annual rate of 4.2%, twice as fast as Japan’s 2.1% aging rate.

In 2020, South Korea ranked only 28th among 38 OECD countries with an elderly population ratio of 15.7%. This ratio is expected to rise to 19.2% in 2024, surpassing the OECD average of 18.8%. Furthermore, by 2045, South Korea’s elderly population ratio is projected to reach 37.0%, overtaking Japan’s 36.8% to become the country with the highest elderly population ratio in the OECD.

According to KERI, among South Koreans aged 65 and older, 83.9% receive public pensions, while 21.8% receive private pensions. These figures are more than 10 percentage points lower than Japan’s 95.1% public pension receipt rate and 34.8% private pension receipt rate, respectively.

The average monthly public pension benefit in South Korea was found to be 669,000 KRW for individual households and 1,187,000 KRW for couples. In contrast, Japan’s average monthly public pension benefits were approximately double, at 1,353,000 KRW for individuals and 2,268,000 KRW for couples. KERI explained, “Japan’s Employees’ Pension Insurance rate, which corresponds to South Korea’s National Pension, is 18.3% of income, about twice South Korea’s 9.0%. This system of paying more and receiving more enables stable income security in old age.”

Additionally, South Korea’s average monthly private pension benefits were 159,000 KRW for individual households and 197,000 KRW for couples, only about half of Japan’s 291,000 KRW for individuals and 458,000 KRW for couples. KERI analyzed that the lower private pension benefits in South Korea are due to insufficient incentives for private pension enrollment, resulting in low participation rates. In fact, South Korea’s tax support rate for private pensions is 19.7%, which is lower than Japan’s 31.0% and the OECD average of 26.9%.

Data provided by Korea Economic Research Institute

South Korea’s Pension Income Low Compared to Appropriate Living Expenses
High Economic Dependence on Children
Both Countries Prioritize ‘Creating Jobs for the Elderly’ as Top Policy Task

According to KERI, South Koreans aged 65 and over responded that the appropriate living expense level is 1,725,000 KRW per month for individuals and 2,555,000 KRW for couples. The pension replacement rate, which indicates the proportion of pension income relative to appropriate living expenses, was 48.0% for individual households and 54.2% for couples. In Japan, the appropriate living expense levels for the elderly were 2,435,000 KRW for individuals and 3,256,000 KRW for couples. The pension replacement rates for Japan’s elderly were 67.5% for individuals and 83.7% for couples.

South Korea’s elderly cited major sources of living funds beyond pensions as bank deposits (33.6%), earned income (30.6%), economic support from children or others (17.4%), and stocks and bonds (10.5%). In contrast, Japan’s elderly reported bank deposits (39.0%), earned income (30.3%), and stocks and bonds (17.2%) as their main sources of living funds beyond pensions, with only 3.6% citing economic support from children or others.

Both South Korea and Japan’s elderly populations identified job creation for seniors as the top policy priority for ensuring old-age livelihood security, with 48.1% in South Korea and 32.0% in Japan selecting this. Choo Kwang-ho, Director of Economic Policy at KERI, emphasized, “It is urgent to strengthen the old-age security functions of public and private pensions and improve income through the provision of quality jobs. To expand quality private-sector jobs for the elderly, labor market flexibility measures such as easing restrictions on dispatch and fixed-term employment, as well as establishing wage systems based on job performance, are necessary.”

This content was produced with the assistance of AI translation services.