Jeong Eun-kyung, Minister of Health and Welfare, announced plans to revise the criteria for basic pension payments in the second half of this year. The current system provides nearly the same amount to the bottom 70% of seniors aged 65 and older, but the new proposal aims to implement a progressive support structure where those with lower incomes receive more. This change addresses concerns that the basic pension, introduced to reduce elderly poverty, does not accurately reflect the severity of poverty among seniors.
Under the current system, the income recognition amount, which is calculated based on the income and assets of elderly households, determines eligibility for monthly payments of up to 349,700 won. While this approach is straightforward and supports a broad range of seniors, the relative evaluation method that mandates 70% of the elderly population to be recipients has increasingly revealed contradictions over time.
The most significant issue is the blurring of policy goals. Seniors with minimal income and those with relatively stable incomes receive similar amounts. By spreading limited resources too broadly, sufficient support does not reach those seniors in dire need. Although the basic pension has a high coverage rate, its effectiveness in alleviating elderly poverty is limited.
The 70% threshold also does not align with reality. As the income and assets of the elderly population generally increase, the eligibility criteria also rise. This means a certain percentage of all seniors must continue to be included, regardless of their poverty status. Conversely, seniors just above the threshold receive no pension at all, leading to a 'cliff effect' where small income differences can drastically affect disposable income.
The government's consideration of a median income-linked approach could serve as a starting point to rectify these issues. Instead of determining eligibility based on rank among seniors, the focus would shift to whether individuals have the income necessary to maintain their living standards. If the goal of the basic pension is to ensure a minimum standard of living for seniors rather than merely distributing payments to 70% of them, applying an absolute poverty standard aligns with this principle.
However, the progressive support structure must not be distorted into a means of reducing the number of recipients to save funds. Payments to low-income seniors should be increased to cover actual living expenses, while mechanisms must be established to prevent sudden loss of benefits for existing recipients. A gradual reduction in payments based on income brackets is necessary. Reforming the 70% threshold into another cliff is not acceptable.
The couple reduction system also needs revision. Currently, if both partners receive the basic pension, each amount is reduced by 20%. While the rationale is that living together saves on expenses, low-income elderly couples still face significant burdens from medical costs, caregiving, and housing. The government's phased reduction should prioritize the poorest couples. Marital status should not disadvantage seniors in their retirement income.
The relationship with the National Pension also needs clarification. If those who have diligently paid premiums perceive that they are worse off in calculating the basic pension, it could diminish their incentive to enroll in the National Pension. The basic pension should be clearly distinguished as a minimum income guaranteed through taxation, while the National Pension serves as an income-based pension based on contributions. Revisions to the basic pension should be pursued within a multi-layered retirement income system that encompasses the National Pension, retirement pensions, and basic living security systems.
Financial sustainability cannot be overlooked. As the elderly population rapidly increases, continuously expanding both the payment amounts and the number of recipients could impose an unbearable burden on future generations. Therefore, focusing on concentrated support for the impoverished rather than universal distribution is essential. The accuracy of income and asset assessments should be improved, and mechanisms should be established to evaluate the effects of poverty reduction and financial burdens periodically.
The success of the basic pension reform hinges not on how many people receive it, but on how much it improves the lives of the most vulnerable seniors. The government should not settle for politically convenient flat increases but must also address payment criteria, reduction systems, and relationships with other pensions. It is time to transform the pension from one that merely adheres to the 70% figure into one that effectively reduces elderly poverty.
* This article has been translated by AI.
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