Pension policy in South Korea

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The poverty rate of elderly people in South Korea is the highest among the OECD countries. 2011 Poverty rate by age group in South Korea.svg
The poverty rate of elderly people in South Korea is the highest among the OECD countries.
Poverty rate in South Korea (age 65+) in 2011 2011 Poverty rate in South Korea (age 65+).svg
Poverty rate in South Korea (age 65+) in 2011

South Korea's pension scheme was introduced relatively recently[ when? ], compared to other democratic nations. Half of the country's population aged 65 and over lives in relative poverty, or nearly four times the 13% average for member countries of the Organisation for Economic Co-operation and Development (OECD). This makes old age poverty an urgent social problem. Public social spending by general government (the central, state, and local governments, including social security funds) is half the OECD average, and is the lowest as a percentage of GDP among OECD member countries. [1]

Contents

South Koreans aged 65 or older may receive three types of pension income: social welfare, a public pension, and a private pension. [2]

Pillars of South Korea's income support system [2]
PillarIncome support system
Third pillarIndividual retirement savings
Second pillarCompany pension
First pillarNational Pension Scheme
Pillar zeroBasic Old-Age Pension
Basic Livelihood Security Programme

History

1990–2007

National health insurance was introduced in South Korea in 1977. [3] By 1989 South Korea had universal health coverage. [3] Other social insurance programmes include Industrial Accident Compensation Insurance (IACI, South Korea's first social insurance program, introduced in 1964), and Employment Insurance (EI, introduced in 1995). [3]

The recent trend in South Korea is towards increased welfare spending. Between 1990 and 2007, South Korean government welfare expenditure increased at a rate of 11% per year in real terms, the fastest rate of increase in the OECD area. [4] [3] Social expenditure between 1990 and 2001 rose from 4.25% to 8.7%, peaking at 10.9% in 1998. [5] [3]

2007–present

In 2007, welfare spending in South Korea was 7.6% of GDP, compared to an OECD average of 19%. [4] Welfare for the elderly amounted to 1.6% of GDP in the same year (a quarter of the OECD average). [4]

The primary social welfare program in South Korea is the Basic Livelihood Security Programme (BLSP), which covers 3% of the country's population (about one fifth of the 15% of South Koreans living in relative poverty). [4] Another program, the National Basic Livelihood Security System (NBLSS) was introduced in 2001. [3]

In 2011, family benefits amounted to 0.5% of GDP, compared to an OECD average of 2.2%, and were the lowest in the OECD. [4]

Pensions in South Korea are administered by the National Pension Service (NPS), introduced in 1988. [4] It was reported that, in 2002, only 6.5% of South Koreans over the age of 60 lived on public pensions. [3] Only about one fifth of the elderly population receives a pension, a major factor contributing to the relative poverty in which nearly half of South Korea's elderly live. This is the highest proportion among OECD countries. [4]

Only a quarter of government welfare spending, in the form of cash payments, goes to the poorest 20% of the population. This is contributing to growing social inequality. [4] The South Korean tax and welfare system is the least effective in reducing inequality among OECD countries. [4]

Social welfare

Basic Livelihood Security Programme

The Basic Livelihood Security Programme (BSLP) is a welfare system that provides cash payments and other benefits, such as housing and education, for citizens living in absolute poverty. [2] The programme was established in 1999, under the National Basic Livelihood Security Act. [6] Absolute poverty occurs when income falls below the minimum cost of living. In 2011, it was reported that approximately 1.4 million people received benefits from the BLSP, of whom 380,000 were elderly. [2] This accounts for only 6.3% of the Korean population over the age of 65.

Strict criteria for assistance under the Programme have resulted in ineligibility for many applicants. For this reason, the BSLP does not provide full cover for the elderly. To qualify, recipients must prove that they cannot receive possible assistance from family members, and must include their assets under the means testing and income criteria. [2] There was some relaxation of the eligibility criteria in 2003, and in 2008 the program was expanded to include a Long-Term Care Insurance for the Elderly. [7]

Basic Old-Age Pension

South Korea introduced its Basic Old-Age Pension in 2008. According to the Ministry of Health, Welfare and Family Affairs, the Basic Old-Age Pension is "designed to enhance welfare of the elderly by providing a monthly pension payment to the elderly in need." [8] The pension was intended to benefit workers contributing to the National Pension Scheme. [2]

By 2012, the pension was only covering 16% of the minimum cost of living, and benefited 67% of Korea's population over the age of 65. [2] It was extended in 2014 to provide monthly allowances of approximately $179 (200,000 South Korean won – KRW) to people over the age of 65 in the bottom 70th percentile of income earned. [7] In 2014, approximately 4.9 million people benefited from this program. [7]

South Korea's old-age pension scheme provides lifetime cover for individuals aged 60 or older, provided they have fulfilled the minimum requirement of 20 years of contributions to the national pension scheme beforehand. [9] Those who have made a minimum of 10 years of contributions and who have reached the age of 60 are eligible for cover under a "reduced old-age pension" scheme.

Additionally, there is an "active old-age pension" scheme, covering individuals aged 60 to 65 who are engaged in income-earning activities. Those aged between 55 and 60 who are not engaged in income-earning activities are eligible for the "early old-age pension" scheme. [10] Around 60% of Koreans aged 65 and over are entitled to a benefit amounting to 5% of their past average income, receiving an average of KRW 90,000. [11]

Basic old-age pension schemes cover individuals aged 65 and older who were earning below an amount set by presidential order. In 2010, that ceiling was KRW 700,000 for a single person and KRW 1,120,000 for a couple, equivalent to around $600.00 and $960.00 respectively. [9]

National Basic Livelihood Security

The National Basic Livelihood Security (NBLS) is a government support system that provides a guaranteed income to senior citizens not receiving family support, whose income is below the national poverty line. [12] It was implemented in 2000 by the South Korea government in response to increasing unemployment and poverty resulting from the 1997 Asian financial crisis. [13] The Korean government was still focusing on rapid economic development, and insufficient attention given to social welfare programs resulted in a weak safety net. The national poverty guidelines applying to the previous pension program were revised under the National Basic Livelihood Security system. [14] In 2000, the minimum cost of living for a single person household was KRW 324,011, which increased to KRW 401,466 by 2005. [14] Despite the revised poverty guideline, only 15% of seniors aged 65 and over received the National Basic Livelihood Security benefit, because of the eligibility requirements. [12]

Public pension

National Pension Scheme

The National Pension Scheme is the public pension scheme created in 1988 in South Korea. It is a part of Korea's Social Security Programs, and was established through the National Pension Act in 1986. [15] The system is managed by the National Pension Service (NPS) under the Minister of Health and Welfare. Subscribers are classified as mandatory (workplace and regional) or voluntary (optional and optional continued). [16] Insurance premiums are calculated by multiplying the subscriber's Standard Monthly Income by the contribution rate, which was 3% in 1988, 6% in 1993, and 9% from 1998 onward. Benefits include monthly pensions and lump-sum payments. Monthly pension benefits include the old-age pension, divided pension, disability pension (grades 1 to 3), and survivors’ pension. Lump-sum payments consist of the refund lump-sum, death lump-sum, and disability lump-sum compensation (grade 4). [17] To qualify for a pension, a person must be at least 62 years old and have made at least ten years of contributions. [18] Reduced early pension can be obtained at the age of 56. The normal pension age will be raised to 65 years by 2033, and the reduced early pension age will increase to 60 years. [10] The National Pension Scheme was created with a strong redistributive element, and participation is mandated by law. [2] As at 2013, only 29% of the elderly received old-age pensions from the National Pension Service. [2] One of the current issues with the National Pension Scheme is that not all retirees will be able to draw benefits from the pension, because they do not meet the ten year contribution requirement. [19]

The South Korean pension system was created to provide benefits to persons reaching old age, to families and individuals affected by the death of their primary breadwinner, and for the purpose of stabilizing the nation's welfare state. [20] South Korea's pensions system structure is primarily based on taxation, and is income-related. In 2007, there was a total of 18,367,000 insured individuals, with only c.511,000 persons exempted from mandatory contribution. [21] The system has about 20 million subscribers and 7 million beneficiaries. Subscriber numbers peaked in 2022 and have declined since, while beneficiary numbers have steadily increased. The contribution-to-expenditure ratio is approximately 76% to 24%. The reserve fund exceeded 1,300 trillion KRW in 2025. [22] Cumulative investment returns stand at approximately 700 trillion KRW, with an average annual return of about 7%. In overseas investments, foreign stocks account for the largest share at 36.8%, whereas in domestic investments, domestic bonds hold the largest share at 24.6%. To ensure long-term stability, the fund has continuously expanded its overseas holdings, which now account for 60% of the portfolio. The total portfolio comprises roughly 55% stocks, 30% bonds, and 15% alternative investments. [23]

The current pension system is divided into four regimes, distributing benefits to participants through the national, military personnel, governmental, and private school teacher pension schemes. [24] The national pension scheme is the primary welfare system, providing allowances to the majority of persons. Eligibility for the national pension scheme is dependent not on income but on age and residence, covering those between the ages of 18 and 59. [25] Anyone under the age of 18 is either a dependent of a person who is covered, or falls within a special exemption to which alternate provisions apply. [9] The national pension scheme provides for four categories of insured persons: the workplace-based insured; the individually insured; the voluntarily insured; and the voluntarily and continuously insured.

The old-age pension is granted to individuals who have contributed for at least 10 years and have reached the eligible pension age. The amount is calculated by adding the basic pension to the dependent’s pension. For income-related adjustments, if a pension recipient engages in income-generating work within five years after reaching the pensionable age, the pension is recalculated based on the timing and amount of the earned income. Early old-age pensions can be claimed up to five years in advance by individuals whose average monthly income over the past three years does not exceed the recent three-year average income. The pension amount is determined by multiplying the standard pension by the age-related payment rate and adding the dependent’s pension. For the divided pension, if a divorced spouse of an old-age pension recipient who was married for at least five years reaches the eligible pension age, the divorced spouse receives half of the portion of the recipient’s basic pension corresponding to the duration of the marriage.

The disability pension is provided to individuals who have contributed for at least one-third of the required subscription period at the time of the first medical diagnosis, or for at least three of the most recent five years. The benefit ranges from 60% to 100% of the basic pension, depending on the disability grade (grades 1 to 3). For grade 4 disabilities, a lump-sum compensation equal to 225% of the basic pension is paid. The survivors’ pension is granted if the deceased had contributed for at least one-third of the required subscription period at the time of death, or for at least three of the most recent five years. The pension amount is calculated for the first-priority survivor based on the deceased’s insured period in ten-year intervals, considering the survivor’s age and disability, and ranges from 40% to 60% of the basic pension.

The refund lump-sum is paid to individuals who have contributed for less than ten years and either reach the age of 60 or lose their citizenship due to emigration. The amount equals the total contributions plus interest calculated according to Presidential Decree, based on the three-year fixed-term deposit rate. The death lump-sum is paid when there is no eligible survivor to receive a survivors’ pension or a refund lump-sum. Its amount is initially based on the refund lump-sum but is limited to no more than four times the deceased’s final or lifetime average monthly income.

If a pension recipient engages in income-generating work and their average monthly income over the past three years exceeds the overall average, the pension may be reduced or suspended. Additionally, if a beneficiary is entitled to more than one type of pension, only one will be paid according to the recipient’s choice, while payments of the others are suspended. However, if an unpaid pension is a survivors’ pension or a refund lump-sum, an additional amount may be granted. Furthermore, if a recipient of a disability or survivors’ pension is also eligible for compensation under another law, their pension is reduced by half. [26]

Employees between the ages of 18 and 59 are covered under the workplace-based pension scheme, and contribute 4.5% of their gross monthly earnings. [20] The national pension scheme covers employees who work in companies employing five or more people; fishermen; farmers; and the self-employed in both rural and urban areas. Employers are also covered under the workplace-based pension scheme, and help meet their employees' compulsory 9% contribution by providing the remaining 4.5%. [9]

The individually insured pension scheme covers anyone aged 18 to 59 who is not employed; those aged 60 or above; and people excluded by article 6 of the National Pension Act. [27] People covered by the individually insured pension scheme must pay the entirety of their 9% contribution themselves.

Voluntarily insured persons are not subject to mandatory coverage, but may choose to be so covered. This category comprises retirees who voluntarily choose to receive additional benefits; individuals under the age of 27 without income; and individuals whose spouses are covered under a public welfare system, whether that be the military, governmental, or private school teacher pension scheme. [25] As in the case of the individually insured, the voluntarily insured are responsible for meeting the full amount of their contribution.

Voluntarily and continuously insured persons are individuals aged 60 who wish to ensure that they fulfill the minimum insured period of 20 years to qualify for old age pension benefits. [27] With the exception of workplace-based insured persons, all other insured persons personally cover their own 9% contribution in full. [25] South Korea has pension portability agreements with some other countries, permitting a Korean pensioner to reside and receive their pension while ordinarily residing elsewhere. New Zealand was added to this list from 1 March 2022.

With the 1960s economic development plans, Korea underwent rapid industrialization, urbanization, and population aging. In 1973, the National Welfare Pension Act was enacted to address related social issues, but postponed due to the economic recession caused by the oil crisis. The National Pension Scheme was revised in 1986 and implemented in 1988 after economic recovery under the 6th Five-Year Plan.These early policy efforts provided the institutional foundation for the establishment of the modern National Pension Scheme in the late 1980s. [28]

The 1988 scheme faced challenges from demographic changes and its low-contribution (3% contribution rate) and high-benefit (70% income replacement rate) design, causing elderly poverty, coverage gaps and conflicts among multi-tiered pension systems. The first reform in 1998 reduced the income replacement rate (from 70% to 60%), raised the pension eligibility age (from 60 to 65), shortened the minimum contribution period (from 15 to 10 years), and introduced a financial calculation system conducted every five years. The second reform in 2007 further reduced the income replacement rate (from 60% to 40%), introduced the Basic Old-Age Pension system, and expanded the pension credits system. [29]

Despite the ambitious intent of the 1988 scheme, its financial sustainability was quickly questioned. As life expectancy increased and the number of contributors remained relatively limited, the pension fund’s future solvency became a policy concern. These issues intensified political debates throughout the 1990s, laying the groundwork for structural reforms aimed at balancing fairness, inclusiveness, and fiscal responsibility.

The first reform was driven by policy shifts and structural problems. Universal coverage proposals in the 1987 and 1992 presidential elections, the globalization agenda emerging after the 1994 APEC Summit, prompted the reorganization of pension governance linking it to the four major social insurances in 1995. The system was enacted in December 1998, with the income replacement rate adjusted from 55% to 60% in consideration of the 1997 Asian Financial Crisis. This step also reflected growing public demand for transparency and fairness in social welfare programs, as well as a recognition of the pension system’s long-term financial challenges.

The second reform faced political and social consensus challenges. Financial concerns from the first actuarial valuation in 2003 delayed the proposed enactment. Emerging issues, including coverage gaps, elderly poverty, and fund management, further prolonged debate. After continued stakeholder discussions and cross-party negotiations, the amendment was finally enacted in July 2007. Implemented before the 2008 Global Financial Crisis, its design was not directly affected, unlike in many Western countries. The reform tried to reflect broader considerations about the long-term sustainability and overall effectiveness of the pension system, taking into account both financial and social perspectives.

Both pension reforms reduced benefits while providing trade-offs. The first expanded coverage to the entire population, and the second introduced various public pension programs. Even afterward, four actuarial valuations sought to secure fiscal stability and adequate benefits, but discussions were eventually halted, failing to reach social consensus. These developments show the ongoing tension between maintaining financial sustainability and meeting the social needs of a growing elderly population. [30]

A partial update to the National Pension Act, scheduled to take effect in 2025, has recently been approved by the National Assembly. The main principle of this change is “pay more, get more.” Known as a parametric reform, this type of update modifies key variables such as contribution rates, benefit levels, and the age at which benefits start, while leaving the overall structure of the pension system unchanged. [31]

This reform was developed after years of debate about how to make the national pension system more sustainable in a country facing one of the fastest-aging populations in the world. South Korea’s fertility rate has dropped to a record low, and the number of people of working age is shrinking every year. These demographic changes have placed significant pressure on the pension fund, which experts had warned could run out within a few decades without reform. In this context, the new changes represent an important effort to slow the depletion of the pension fund and restore public confidence in the system.

Under the revised law, the contribution rate will increase gradually from 9% to 13% by 2033, rising by 0.5 percentage points each year starting in 2026. The income replacement rate, originally planned to decrease to 40% by 2028, will now rise to 43% beginning in 2026. [32] This means that workers will pay more into the system but will also receive somewhat higher benefits upon retirement. The aim is to share the financial load between current and future generations while making retirement income more adequate.

To strengthen public trust, the legislation explicitly states that the government must ensure stable and continuous pension payments. This official commitment is intended to reassure people who have long doubted whether the government would be able to meet full pension obligations in the future. Other reforms include expanding the childbirth credit: now, the first child provides 12 additional months of pension credit, and the previous 50-month limit has been removed. The military service credit is increased from 6 to 12 months, and the government will subsidize 50% of contributions for low-income regional subscribers for up to 12 months. [33] These adjustments demonstrate that the reform considers not only financial variables but also social factors such as low birth rates, fairness, and income inequality.

By adding these social credits, the reform seeks to make the pension system more inclusive and responsive to the needs of various groups. For instance, expanding the childbirth credit helps parents, particularly women, whose career interruptions may reduce total contribution periods. Similarly, acknowledging military service more fully reflects fairness toward men who serve in the military. Subsidies for low-income subscribers are also important, as they help individuals remain in the system who might otherwise be unable to continue contributing.

Even though this is the first major reform in 18 years, critics argue that it does not fully address long-term sustainability. The pension fund is now projected to last until 2071, roughly 15 years longer than previously estimated, but this does not offer a permanent solution. Raising both contribution rates and replacement levels partially offsets financial improvement, leaving long-term risks. Experts note that simply adjusting numbers will not be enough in a rapidly aging society. Without deeper structural changes—such as increasing the pensionable age or restructuring the entire system—the fund may face similar problems in the future.

There are also concerns regarding generational equity. Younger workers will pay higher contributions throughout their careers, yet the extra benefits may not fully make up for the added costs. This could lead to frustration among younger generations, who already face unstable employment, high housing costs, and uncertain futures. Even with a 43% replacement rate, after 40 years of contributions, pension payments may still fall below the minimum living cost, indicating that the reform does not completely ensure sufficient retirement income. In short, while the reform enhances financial stability slightly, it does not fully solve the problem of old-age poverty, one of South Korea’s major social issues. [34]

Another limitation is that the reform does not change the pension system’s underlying structure. It adjusts figures like contribution and replacement rates but does not address deeper inefficiencies or structural issues. For example, the retirement age for full benefits remains at 65, even though many developed nations have gradually raised it in line with longer life expectancy. Additionally, there is still no clear plan to integrate the national pension with other public or private pension schemes, which makes it harder to establish a balanced multi-pillar pension model. [35]

The reform also highlights political challenges. For nearly 20 years, efforts at reform were blocked due to strong public opposition. Increasing contributions is unpopular, and reducing benefits is politically risky. As a result, policymakers frequently postponed decisions. The 2025 reform is a rare example of political compromise, showing what politicians could realistically achieve, even if it is not the most economically ideal solution. [36]

Supporters argue that the reform is at least a realistic and necessary step. By sharing responsibility between workers and the government, it signals that the pension problem can no longer be deferred. Combining financial adjustments with social measures may help restore public confidence in the national pension, which has been declining. If implemented successfully, it could lay the groundwork for further and more fundamental reforms in the future.

Critics, however, caution that the government’s guarantee of pension payments could increase future fiscal pressure. If the fund runs out sooner than expected, the government may need to cover payments through taxes or debt, straining the budget and limiting resources for other welfare programs. Long-term monitoring and transparent financial management will therefore be crucial to avoid new risks. [37]

In the broader context, the 2025 reform reflects South Korea’s urgent need to adapt to its changing population. With one of the lowest fertility rates and highest life expectancies in the world, Korea is expected to become a “super-aged” society by 2035. Nearly half the population will be retired or nearing retirement age, making a sustainable pension system vital not only for welfare but also for economic and social stability. [38]

Looking ahead, many experts believe Korea will eventually need to go beyond parametric reforms and consider structural changes. Options may include integrating the national pension with other public schemes, introducing a diversified multi-pillar system combining public and private pensions, or adopting a notional defined contribution (NDC) model similar to those in some European countries. Such reforms could make the system more transparent, fair, and better adapted to demographic changes. [39]

The 2025 National Pension reform is an important step but remains a partial and temporary solution. Questions remain about whether the system will be stable and fair in the long term. The reform shows that the government understands the seriousness of the problem but also emphasizes the difficulty of balancing financial responsibility with social protection. Its success will depend on whether it becomes a foundation for future improvements rather than a one-time change.

In conclusion, the 2025 pension reform can be seen as a necessary compromise and a first step toward more significant changes. It enhances short-term financial stability and introduces fairer, more inclusive policies, but it does not fully secure the system’s future. Ensuring a reliable and fair pension for all generations in South Korea will require ongoing dialogue, new policies, and continued public trust in the years to come.

Private pension

Corporate pension

Korea launched its voluntary retirement allowance scheme in 1953. [40] The retirement allowance was given in the form of a single lump-sum payment, equivalent to one month of the base salary, for any employee who had worked for more than one year. [41] Because there is low employment tenure in Korea, many workers receive their retirement allowance before they retire. [42] The allowance, intended to serve in the absence of unemployment insurance, does not provide employees with enough benefits and security to cover their retirement needs. [42]

In 2005, to provide the benefits and protection not covered by the allowance system, the government introduced the retirement pension, it is alongside this, also known as the corporate pension. [43] The corporate pension system provides two forms of benefits in addition to the traditional voluntary personal pension saving account: the defined benefit and defined contribution plans. [40] Pay-outs from the two new plans are provided either as a lump-sum payment on retirement, or as an annuity. [44]

In 2009, private pension spending as a percentage of GDP was 7.9%, amounting to KRW 10.3 trillion. [40] By the end of 2009, 1.723 million workers were already enrolled in the plan. [40] By 2011, 2.7 million people, or 30% of regular workers, were enrolled and protected. [41] In 2016, the benefit coverage was expanded, with 5.4 million workers enrolled in the scheme, or 15% of the total working-age population (aged 15 to 64). [45]

However, population aging is imposing budgetary constraints on the government. Increased life expectancy, combined with a low fertility rate, will increase the old-age dependency ratio in Korea, "from 15 percent in 2010 to 71 percent in 2050." [43] At the same time, the country is making efforts to privatize its pension system, as other developed Western countries have done. [40] Korea lowered its replacement rate for the public pension to 50% in 2008, upon introducing the Basic Old-Age Pension. A further reduction to 40% is scheduled by 2028. [40]

The 2007 National Pension reform did not guarantee long-term financial solvency, but rather exacerbated the need for expansion of coverage. The reform sparked an outcry from social organizations. [43] In combination with the 2008 financial crisis, this resulted in a strong push in favour of free welfare in Korea, evident in the 2012 presidential election of Park Geun-Hye. [46] But budgetary constraints forced the Park government to scale down its promises to increase spending without increasing tax. [46] To fill the gap between budgetary constraints and the need for increasing social support for people over 65, the government will need to expand and strengthen corporate pension coverage as the second pillar in the income security system. [42] 2007 data showed that Korea had a gross public pension replacement rate [47] of just over 40%, and private pension assets were less than 5% of GDP, indicating significant room for improvement. [40] As at 2016, less than 2% of those enrolled in the corporate pension system were receiving payment in the form of an annuity. [42]

Current aging status

During the 1970s and 1980s, the Korean government focused on rapid economic development, and social welfare was not the leading priority. [12] Politicians relied on the Confucian societal norm of families caring for, and supporting, elderly relatives. [12] In 2000, the proportion of people in South Korea aged over 65 reached 7%, giving the country aging society status. [48] The nation has one of the fastest-aging populations among OECD members and one of the lowest fertility rates in the world, with 0.7 births per woman in 2024. [49] The national statistics service, Statistics Korea, estimates that South Korean society will reach "hyper-aged" status by 2025. [50] The South Korean government’s 2016 Plan for Aging Society and Population estimated the cost of action to slow the falling birth rate and working population at about KRW 34 trillion. [51]

Demographic Challenges and Sustainability

The long-term viability of South Korea's pension system is seriously threatened by the country's expanding population pressures. The percentage of citizens 65 and older is predicted by the government to surpass 40% by 2050, significantly decreasing the working-age population that contributes to the system. [52]

The National Pension Service (NPS), which was founded in 1988, presently uses an investment reserve fund in conjunction with a pay-as-you-go concept. Experts have cautioned that if reforms are not put in place, the fund's reserves could run out by 2055–2060 as the dependency ratio rises. In order to reconcile fairness and budgetary stability. [53]

As a country's population declines, GDP growth may grow even more slowly or decline. If that condition continues, a country would experience an economic recession. If these conditions become permanent, the country could find itself in a permanent recession.

Public concern over the future of pensions remains high: recent surveys show that less than one-third of South Koreans under 40 believe they will receive full benefits upon retirement. South Korea also has the highest elderly poverty rate among OECD countries—exceeding 40%, compared to the OECD average of around 15%. This stark disparity underscores the urgent need for pension reform and stronger social protection for older adults. [54]

Progressive parties have called for expanding the redistributive role of the NPS and strengthening basic pensions for low-income seniors, while conservative parties emphasize fiscal discipline and gradual adjustments to maintain solvency. Public concern over the future of pensions remains high: recent surveys show that less than one-third of South Koreans under 40 believe they will receive full benefits upon retirement. [55] [56]

Gender Inequality in Pension Coverage

Gender disparities remain a significant issue within South Korea’s pension system. Although the National Pension Service (NPS) aims to provide universal coverage, women are less likely than men to meet the eligibility and contribution requirements needed to receive full benefits. According to the OECD (2023), only around 35% of women aged 65 and over in South Korea receive a contributory pension, compared to over 50% of men in the same age group. [57]

These gaps stem largely from differences in labor market participation and career interruptions. Women are more likely to take extended breaks from work for childcare and family responsibilities, leading to fewer years of pension contributions. The gender wage gap—among the highest in the OECD—also results in lower contribution levels and smaller benefits. [58] Many women working in the informal or part-time sectors are excluded entirely from the contributory pension system.

To address these disparities, the government introduced the Basic Pension in 2014, which provides a flat-rate payment to low-income elderly citizens regardless of their contribution history. While the policy has expanded access and reduced elderly poverty, it remains limited in amount and does not fully close the gender gap in retirement income. [59]

Experts and women’s advocacy groups continue to call for reforms that recognize unpaid caregiving work and improve the inclusion of women in the formal labor force. Proposals include crediting pension contributions for caregiving periods, expanding part-time workers’ eligibility, and promoting greater gender equality in employment to ensure more equitable pension outcomes. [60] [61]

Recent Reform Proposals (2022–2025)

In response to concerns over the long-term sustainability of the National Pension Service (NPS), the South Korean government has launched multiple initiatives since 2022 to review and reform the national pension framework. The Pension Reform Committee, established under the Ministry of Health and Welfare in late 2022, was tasked with conducting financial projections and evaluating potential policy changes to ensure the solvency of the system beyond 2055. [62]

The committee presented preliminary findings in 2023, warning that the NPS fund could be depleted by the mid-2050s under current contribution and benefit structures. In response, several reform options have been discussed, including:

Public response to these proposals has been mixed. While many experts agree that reforms are urgently needed to maintain the pension fund’s long-term solvency, citizens have expressed concern over higher contribution rates and the possibility of reduced future benefits. Younger generations, in particular, have voiced skepticism about the sustainability of the system, fearing that they may contribute throughout their working lives without ever receiving adequate support in retirement. These debates have sparked broader discussions about intergenerational fairness, fiscal responsibility, and the role of the welfare state in South Korea’s rapidly aging society.

The proposed reforms have generated significant political debate. The People Power Party (conservative)has generally supported incremental changes to strengthen fiscal sustainability, while the Democratic Party (progressive) has emphasized the need to expand coverage and maintain adequate benefit levels to prevent elderly poverty. [64]

In 2024, the government announced plans to consolidate public discussions and submit a comprehensive pension reform bill to the National Assembly by 2025. The proposals remain under review, with policymakers seeking to balance fiscal responsibility, intergenerational equity, and social protection for South Korea’s rapidly aging population. [65] [66]

There is a trend in South Korea towards delaying marriage, contributing to a declining birthrate. [51] This is partly related to increased unemployment rates between the ages of 25 and 29. [67] High levels of education have created a very competitive labor market context. The number of young people holding a bachelor's degree or higher rose from 30% in 2003 to over 41% in 2016. [67] South Korean government statistics showed that, in mid-2014, for the 15–29 age group the highest level of unemployment reached was 9.5%, for an employment rate not exceeding 41%.[ citation needed ] This expansion of higher education was not anticipated by the job market, as the South Korean youth employment rate had remained at around 60% over the preceding 30 year period. [68] Finding employment in youth is considered a prerequisite to marrying, to ensure financial security.

See also

References

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  10. 1 2 "Korea: Pension System in 2014" (PDF). OECD.
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  13. ↑ Gao, Qin; Yoo, Jiyoung; Yang, Sook-Mee; Zhai, Fuhua (2011-04-01). "Welfare residualism: a comparative study of the Basic Livelihood Security systems in China and South Korea". International Journal of Social Welfare. 20 (2): 113–124. doi:10.1111/j.1468-2397.2010.00732.x. ISSN   1468-2397.
  14. 1 2 Jo, Joon Yong (2007). The National Basic Livelihood Security System in Korea: Effects on poverty and social development (PhD thesis). University of California. ProQuest   304900928.
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  20. 1 2 Bang, Ha-Nam, Study of Korean Corporations’ Retirement Allowance Schemes, Korea Labor Institute, 1998.
  21. ↑ "South Korea and Japan's Pension System Compared" (PDF).
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  27. 1 2 "The National Pension Act: Republic of Korea" (PDF).
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  30. ↑ 류, 재린 (2022). "공적연금 재구조화 방안 연구 (Study on the Restructuring of Public Pension)". 한국보건사회연구원 (in Korean). 연구보고서(수시) (2022–01). Retrieved 9 November 2025.
  31. ↑ “Understanding National Pension Reform in Simple Terms: ‘Pay More, Get Less’”, Kyunghyang Shinmun, March 19 2025, https://www.khan.co.kr/article/202503191009001.
  32. ↑ “‘More Contribute, More Receive’ National Pension Reform Bill Passes Plenary Session,” Chosun.com, March 20, 2025, https://www.chosun.com/politics/politics_general/2025/03/20/H7K53AUB2FGUHDAV5YKTUFLNYI/
  33. ↑ “‘National Pension Reform Bill’ Passed the National Assembly, To Be Implemented Next Year—‘An Achievement After Long Deliberation’,” Policy Briefing, Republic of Korea, March 20, 2025, https://www.korea.kr/news/policyNewsView.do?newsId=148940810
  34. ↑ “Labor Unions Denounce Agreement on 43% National Pension Replacement Rate as ‘Declaration of Giving Up on Retirement’—Call for 50% Rate,” Hankook Ilbo, March 17 2025, https://www.hankookilbo.com/News/Read/A2025031715380004090
  35. ↑ “Evaluation of Parametric Reform of the National Pension and Additional Reform Tasks.” WorkLaw, May 13, 2025. https://www.worklaw.co.kr/main2022/view/view.asp?bi_pidx=37906
  36. ↑ Jang, Kyu-ho. “17 Years After: Will the Pension-Reform Proposal Lighten the Burden for Future Generations?” Hankyung Sanggan Sang, Sept. 23 2024. https://sgsg.hankyung.com/article/2024092063251
  37. ↑ “Subscribers Were Indifferent to Their Children, and Politicians Were Cowardly.” SisaIN, May 12, 2025. https://www.sisain.co.kr/news/articleView.html?idxno=55344
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  39. ↑ Kim, Soon-hwan. “The Need to Explore New Directions for National Pension Reform, Including NDC, ABM, and Guaranteed Pension.” Pinpoint News, July 22, 2025. https://www.pinpointnews.co.kr/news/articleView.html?idxno=361841
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  43. 1 2 3 J., Clements, Benedict (2014). Equitable and Sustainable Pensions : Challenges and Experience. International Monetary Fund. pp. 223–238. ISBN   9781475565195. OCLC   881315656.{{cite book}}: CS1 maint: multiple names: authors list (link)
  44. ↑ Development, Organisation F.O.R. Economic CO-Operation A.N.D; Oecd (2018). OECD Pensions Outlook 2018. doi:10.1787/pens_outlook-2018-en. ISBN   9789264305403. ISSN   2313-7630. S2CID   239586831.
  45. ↑ OECD (2018). OECD Economic Surveys: Korea 2018. Paris: OECD Publishing. doi:10.1787/eco_surveys-kor-2018-en. ISBN   978-92-64-30082-8. S2CID   242103386.
  46. 1 2 Yang, Jae-jin (2017), "Wind of Free Welfare and Tax Politics under the Returned Conservative Rule (2008–2017)", The Political Economy of the Small Welfare State in South Korea, Cambridge University Press, pp. 184–210, doi:10.1017/9781108235419.008, ISBN   9781108235419
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  58. ↑ "Korean Women's Development Institute". eng.kwdi.re.kr. Retrieved 2025-11-09.
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  61. ↑ "Asia and the Pacific". UN Women – Headquarters. Retrieved 2025-11-09.
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  63. ↑ Min-kyung, Jung (2024-04-30). "Rival parties lock horns over state pension reform plan". The Korea Herald. Retrieved 2025-11-09.
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  65. ↑ {{cite web}}: Empty citation (help)
  66. ↑ "Pensions at a Glance 2023". OECD. 2023-12-13. Retrieved 2025-11-09.
  67. 1 2 Choi, Kyungsoo (June 2017). "Getting to Grips with South Korea's Youth Unemployment Malaise". Global Asia (in Korean). 12 (2). ISSN   1976-068X.
  68. ↑ Mok, Ka Ho; Neubauer, Deane (2016). "Higher education governance in crisis: a critical reflection on the massification of higher education, graduate employment and social mobility". Journal of Education and Work. 29 (1): 1–12. doi:10.1080/13639080.2015.1049023. S2CID   155841015.

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