Gov't seeks to raise basic pension for poorest older adults to 400,000 won

The government is moving to increase the basic pension by around 14 percent to 400,000 won ($265) a month for its poorest older adults, targeting those who fall below 50 percent of the median income, according to multiple state officials on Tuesday.

Under the original system, older adults aged 65 and above in the bottom 70 percent of the income distribution are eligible to receive up to 349,700 won a month, regardless of how much money they make, meaning someone with zero income receives the same payment as someone earning close to the eligibility ceiling. The reform would change that by linking payout amounts to income level, directing the largest increases to the most financially vulnerable.

To avoid stripping existing recipients of their benefits, the government also plans to keep the eligibility threshold at 100 percent of the national median income rather than sharply lowering it. Thus, the current recipients would continue to qualify, but future increases would be concentrated among those with the lowest incomes, officials said. 

The basic pension is a welfare program aimed at preventing poverty among older adults, separate from the National Pension, which is funded through mandatory monthly contributions from subscribers. To qualify for the basic pension, an older adult's recognized income — combining income and assets — must not exceed 2.47 million won a month for a single-person household or 3.95 million won for a couple.

Korea had the highest poverty rate for older adults among Organisation for Economic Co-operation and Development member states at 39.7 percent in 2022, according to a researcher at the Korea Institute for Health and Social Affairs.

Critics have long argued that the current basic pension system fails to provide robust protection for the poorest older populations because recipients receive the same amount if their recognized income falls between zero and 2 million won.

As older Koreans have accumulated more income and assets, due to rising property prices, the eligibility threshold of 2.47 million won has climbed to 96.3 percent of the national median income. This allowed a significant number of middle-class older adults to qualify and receive the income. This year’s median income stands at 2.56 million won, according to the Ministry of Health and Welfare.

At the same time, about 86 percent of actual recipients had recognized monthly incomes below 1.5 million won as of September last year. The disparity strengthened the calls to allocate more resources to low-income households.

Immediately lowering the eligibility threshold to 50 percent of the median income would strip many current beneficiaries of their pensions. Thus, the government is expected to keep the eligibility line at 100 percent of the national median income so that existing recipients can continue receiving benefits.

Instead, payments are likely to vary by income, with financially vulnerable populations receiving up to 400,000 won per month.

“If we sharply lower the eligibility threshold right away, some current recipients would lose benefits,” a government official said. “The current direction is to keep eligibility at 100 percent of the median income and to provide more support to those in greater need.”

The proposal specified what President Lee Jae Myung had envisioned for a progressive basic pension system.

“An older adult earning several million won a month receives the same basic pension as one with zero income," Lee wrote on X in March. "Shouldn't we now consider providing somewhat more generous benefits to poor older adults? We could leave existing benefits untouched and direct future increases to those with the lowest incomes.”

As part of the reform, the government is also considering alleviating the current 20 percent benefit cut imposed on married couples when both spouses receive the pension. It also reportedly mulls ways to ease restrictions on basic pension eligibility for recipients of occupational pensions, such as the civil service pension and their spouses.

The government is also reviewing ways to ease the so-called benefit offset problem, in which low-income older adults lose part of their livelihood assistance once they start receiving the basic pension. However, officials appear likely to leave the rule that links basic pension reductions to the amount a recipient receives from the National Pension system untouched for now.

The government’s preferred direction had also surfaced at an expert forum convened on Tuesday when the Ministry of Health and Welfare gathered specialists to discuss elderly poverty and possible reforms to the pension system.

Lee Won-jin, a researcher at the Korea Institute for Health and Social Affairs, said that basic pension’s effectiveness in reducing elderly poverty has stagnated and weakened since policy-driven increases in benefit levels halted in 2021. He argued that higher payments would be needed to improve poverty among older populations.

Choi Ok-geum, a senior official at the National Pension Research Institute, proposed abolishing the current target coverage rate of 70 percent. Choi also proposed an idea of linking eligibility to the national median income and implementing a graded payout scheme for low-income older adults as a short-term measure.

Over the longer term, she suggested gradually transforming the program into a minimum-income guarantee system focused on lower-income elderly people, which takes into account the maturation of the state pension administered by the National Pension Service and future developments in elderly poverty.

BY RHEE ESTHER [[email protected]]