Basic Pension Received by 70% of Elderly, Reducing Recipients and Increasing Benefits

October National Pension Comprehensive Operation Plan Announcement
Basic Pension Aims to Address 'Poverty Alleviation' Purpose

The basic pension reform plan is being actively considered to narrow the eligibility for the basic pension, which 70% of all elderly people currently receive, while increasing the benefit amount. This is because there have been ongoing concerns that the current basic pension system does not align with the purpose of alleviating elderly poverty, and as the comprehensive reform direction of the National Pension focuses on 'financial stability,' alternative measures to ease the burden on vulnerable groups have become necessary.

Elderly people are strolling near Tapgol Park in Jongno-gu, Seoul. Photo by Jinhyung Kang aymsdream@

According to a comprehensive report by Asia Economy on the 23rd, related ministries such as the Ministry of Economy and Finance and the Ministry of Health and Welfare will include a plan to adjust the eligibility criteria for the basic pension in the comprehensive operation plan for the National Pension reform to be announced in October. This follows discussions on issues and improvement measures regarding the basic pension held by the National Pension Financial Calculation Committee under the Ministry of Health and Welfare. The report that the Financial Calculation Committee will soon present to the Ministry of Health and Welfare is also expected to contain a rough proposal on the direction of changing the eligibility criteria for the basic pension amount.

Currently, there is discussion about reducing the number of basic pension recipients, who are elderly people in the bottom 70% income bracket, by about half while increasing the benefit level. To this end, it is expected that the current target recipient rate (currently paying to the bottom 70%) will be replaced with a method specifying recipients below a certain income level. However, opinions such as providing the basic pension to 100% of the elderly but differentiating payments according to income level to strengthen support for truly impoverished elderly will also be comprehensively reviewed.

The reason the government is considering reforming the basic pension system is due to the awareness that the current system does not align with the purpose of alleviating elderly poverty. The basic pension is paid to elderly people aged 65 or older whose household 'recognized income amount' (calculated by adding monthly income evaluation amount, monthly income conversion amount, etc.) is below the 'selection criteria amount.' As of this year, the basic pension is up to 323,180 KRW per month for a single elderly household. For a couple household, it is up to 517,080 KRW per month. The government has raised the selection criteria amount every year to meet the target recipient rate of the bottom 70%.

When the basic old-age pension was first implemented, eligibility was granted only if the monthly recognized income amount for a single elderly household was 400,000 KRW or less, but after 15 years, now those earning 2,020,000 KRW or less per month can receive the basic pension. There is also analysis that the actual recognized income amount is much higher. According to the report 'Current Basic Pension Issues and Improvement Measures' presented by Choi Ok-geum, Senior Researcher at the National Pension Research Institute, at the Financial Calculation Committee meeting, to achieve the target recipient rate of the bottom 70% in line with the increase in income and assets of all elderly, the government has continuously expanded various deductions in the monthly recognized income calculation process. As a result, it is calculated that a single elderly household can earn up to 3,970,000 KRW per month and still receive the basic pension.

This also serves as a supplementary measure following the National Pension reform plan, which has been focused on 'financial stability' through discussions by the Financial Calculation Committee. The Financial Calculation Committee has decided to exclude scenarios that increase the income replacement rate (the ratio of pension amount to average income during the pension subscription period) in the final report on the National Pension reform plan and instead propose scenarios that raise the contribution rate and delay the pension start age. Therefore, supplementary measures targeting impoverished groups who will bear a heavy burden from future contribution increases are necessary. However, the Ministry of Health and Welfare explained, "The final report of the National Pension Financial Calculation Committee has not yet been finalized."

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