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Basic pension reform must move quickly without increasing fiscal burdens

Published: 17 Mar. 2026, 00:00

Lee Seung-hee, left, and Kim Do-heon, research fellows at the Korea Development Institute, present a proposal titled “Direction for Reforming the Basic Pension Eligibility System” at the Government Complex Sejong on March 25, 2025. [YONHAP]

Rapid population aging is making major surgery on Korea’s basic pension system unavoidable. The National Assembly Budget Office estimates that total basic pension payments, about 35 trillion won ($24 billion) this year, will rise to 38.5 trillion won by 2031. Add up the projected payments over the next six years and the total reaches 220 trillion won. That estimate assumes no change in the current rule, under which benefits are paid to seniors in the bottom 70 percent of the income distribution.

Unlike the National Pension, which is financed by premiums paid by subscribers, the basic pension is funded entirely through central and local government budgets. In the end, the burden must be borne by the generation still in the work force and paying taxes. That is why there is growing concern that, unless reform is accelerated, the basic pension could intensify intergenerational conflict just as the National Pension has.

A leading alternative proposed by many pension experts, including researchers at the Korea Development Institute (KDI), is a progressive rate model that gives more to poorer seniors and less to those who are relatively better off. At present, most recipients receive the same amount, except in limited cases subject to partial reductions. The proposal is to introduce differentiated payments based on income levels.

President Lee Jae Myung also mentioned such an approach on social media on Monday. But there is a major difference between a full-scale restructuring that includes the current pension amount and a more limited approach that applies the principle only to future increases. The direction suggested by the KDI and other experts has been a comprehensive readjustment that includes existing payments. Only such an approach, they argue, can strengthen the basic pension’s role in guaranteeing a minimum standard of living for poor seniors without further increasing its fiscal burden.

Since the system was introduced in 2007, successive governments have justified the basic pension as a way to reduce elderly poverty. But the program is increasingly running into limits because of its mounting fiscal cost. In that situation, any further increase in the overall payment level should be approached with particular caution.

Instead, it would be more desirable to reduce payments to seniors who are relatively comfortable and use the savings to expand support for those who are genuinely struggling to make ends meet. The political class should stop focusing on immediate electoral calculations and approach basic pension reform with a sense of responsibility. The issue is tied not only to today’s elderly poor but also to the country’s fiscal future and social cohesion.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.