Government moves to reform basic pension to give more to low-income elderly

The government plans to restructure the basic pension so that elderly people with lower incomes receive larger payments, while also pushing to activate a fund-type retirement pension system and make external reserve deposits mandatory. The broader goal is to build a multi-layered retirement income security framework linking the national pension, basic pension, retirement pension and personal pension.

The Ministry of Finance and Economy and the Ministry of Health and Welfare held the second meeting of the cross-ministry task force supporting the National Assembly's Special Committee on Pension Reform on Wednesday at the Kensington Hotel in Yeouido, Seoul. Attendees included Vice Minister Lee Hyeong-il of the Ministry of Finance and Economy, Vice Minister Hyeon Su-yeop of the Ministry of Health and Welfare, and officials from the Ministry of Employment and Labor, the Ministry of Planning and Budget and the Financial Services Commission.

The meeting reviewed the progress of each pension system — national, basic, retirement and personal — and examined structural reform tasks. The government completed parametric reforms in April that will gradually raise the national pension contribution rate from the current 9 percent to 13 percent by 2033 and increase the income replacement rate to 43 percent. It is now expanding the reform discussion to the pension system as a whole.

Restructuring the basic pension to more heavily support low-income elderly people was a central agenda item. Currently, the basic pension is paid to people aged 65 and older in the bottom 70 percent of the income distribution. The maximum monthly payment for a single-person household stands at 400,000 won ($260), with some reductions based on recognized income, but the overall payment structure is largely uniform.

President Lee Jae-myung wrote on X, formerly Twitter, in March that "the basic pension needs some changes to reduce elderly poverty, which can even drive people to suicide," adding that "the current structure has elderly people with monthly incomes of several million won receiving the same basic pension as those with zero income." He asked followers whether it might be worth "keeping current payments as they are but applying the lower-income-first principle only to future increases."

The government has not yet decided on specifics, such as whether to differentiate payment amounts by income bracket or provide additional support to the lowest-income tier. It plans to finalize details through consultations between the Ministry of Health and Welfare and the Ministry of Planning and Budget and through the budget formulation process.

"The only thing decided at this point is the direction — restructuring toward a system that gives more to those with lower incomes," a Ministry of Finance and Economy official said. "In practical terms, it will mean providing greater support to lower-income groups." A Ministry of Health and Welfare official echoed that view, saying, "What is certain is that the direction is to pay more in basic pension to elderly people with lower incomes."

Reform of the retirement pension system is also expected to accelerate. Building on a labor-management-government agreement reached in February, the government is working out plans to activate the fund-type retirement pension model and make external reserve deposits mandatory. The moves are intended to improve retirement pension returns and protect workers' benefit rights in the event of corporate insolvency or bankruptcy.

On the national pension front, the government aims to strengthen fiscal stability on the back of strong fund performance. The national pension fund posted a record return of 18.82 percent last year, with total assets reaching 1,458 trillion won, an increase of 245 trillion won from the previous year.

"To build a stable and sustainable retirement income security system, we must continue reform efforts across each pension scheme — national, basic and retirement," Vice Minister Lee said. "We will strengthen the links between systems so that people can feel the tangible benefits of pension reform."

Vice Minister Hyeon said anxiety about the national pension persists even after the reform, and pledged that the ministry would work to secure fiscal stability and sustainability through measures such as improving fund returns. He added that it would "actively support the discussions of the National Assembly's Special Committee on Pension Reform."