Basic pension reform should fix national pension-linked cuts

Shin Sung-sik

The author is a welfare specialist reporter at the JoongAng Ilbo.

The government has begun work on reforming the basic pension, marking the first overhaul since its introduction in 2014. Counting its predecessor, the basic old-age pension introduced in 2007, it has been nearly two decades. The Ministry of Health and Welfare has declined to specify a timeline, saying no decision has been made.

As of last year, 7.07 million people received the basic pension, according to the Social Security Information System. The monthly payment stands at 349,700 won ($230). The emerging direction of reform is to provide more benefits to lower-income recipients while reducing support for higher-income groups. President Lee Jae Myung, who had previously advocated expanding coverage, has shifted toward this approach. With a growing consensus that extending benefits to the middle class is unnecessary, the proposal has drawn relatively limited opposition.

Lee also ordered a reduction in the spousal benefit cut, an issue that has generated significant controversy. In a post on X, formerly Twitter, on March 16, he wrote that couples should not be penalized for staying together, noting reports of sham divorces to avoid benefit reductions. He called for corrective measures.

Under current rules, when both spouses receive the basic pension, their combined benefit is reduced by 20 percent. Instead of 699,400 won, couples receive 559,520 won. Lee has called for abolishing this reduction since 2021, when he served as leader of the Democratic Party, and included the pledge in his presidential campaigns in 2022 and 2025. He has described the policy as encouraging “immoral” behavior, such as sham divorces. Last year, about 3.14 million people, or 44 percent of all recipients, were affected by the spousal reduction.

Many older citizens express a strong attachment to the benefit. Cho Chang-shin, 81, from Dongdaemun District in Seoul, described it as a “national salary,” saying people look forward to receiving it each month. He recalled a friend questioning why couples should face reductions simply for living together, adding that older people often have no means of earning income and feel unfairly treated.

The government plans to apply its redistributive approach to spousal benefits as well, gradually easing reductions for lower-income couples. Several lawmakers from the Democratic Party, including Rep. Seo Young-seok, Rep. Lee Soo-jin and Rep. Kim Tae-nyeon, have proposed revisions. Seo’s bill, which aligns closely with the government’s direction, would lower the reduction rate for the bottom 40 percent of income earners from 20 percent to 10 percent over five years.

If adopted, about 1.26 million people would see smaller cuts. These households have a recognized income of less than 1 million won. Their combined monthly pension would rise from about 560,000 won to 630,000 won. The National Assembly Budget Office estimates the measure would cost 2.4 trillion won between 2027 and 2031.

Opponents argue that couples do not require double the living expenses, which is why the benefit is set at 1.6 times that of a single household rather than twice as much. They also note that couples tend to have higher combined income and assets. Despite these concerns, Lee’s longstanding criticism of the reduction suggests opposition may have a limited impact.

Research also supports easing reductions for low-income couples. A report published in July by the National Pension Research Institute found that consumption spending, including housing, medical and transportation costs, is 1.7 to 2 times higher for low-income couples than for single households, exceeding the current 1.6 multiplier applied to basic pensions.

Kim Min-soo, an associate research fellow at the institute, said that financially vulnerable couples may still struggle even if they receive full benefits. He suggested gradually easing reductions for low-income households. A 65-year-old resident of Gyeonggi said that despite earning just over 2 million won a month from various sources, including pensions and part-time work, expenses such as rent and medical costs leave little room for savings.

Another major issue is the linkage between the basic pension and the national pension. If a recipient’s monthly national pension exceeds 524,600 won, the basic pension can be reduced by up to 50 percent. The longer the contribution period, the greater the reduction. Critics argue that this linkage is inappropriate because the national pension is contributory, while the basic pension is funded by public finances.

According to data from Rep. Kim Sun-min of the Rebuilding Korea Party, about 840,000 people saw their benefits reduced last year, by an average of 96,000 won per month. Some individuals have opted for early retirement pensions to minimize these cuts. One such case, cited in a 2022 research report, involved a man who began receiving his pension five years early, accepting a 30 percent reduction.

Rep. Kim has proposed eliminating the linkage and extending eligibility to recipients of public sector pensions. Even without full abolition, raising the income threshold or lowering the maximum reduction rate could better protect low-income seniors. The challenge remains funding. Narrowing eligibility and reducing benefits for higher-income groups may provide a solution. A comprehensive reform addressing all related issues appears necessary.

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.