Home equity pension enrollment tops 2% for first time as monthly payouts rise

A surge in new enrollments this year is set to push the home equity pension participation rate above 2% for the first time since the program launched in 2007. The increase is attributed to government measures that raised monthly payouts and reduced enrollment costs. However, with only about one in 50 eligible households enrolled, experts say further reforms are needed for the program to become a reliable source of retirement income for older Koreans.

According to data submitted to Democratic Party of Korea lawmaker Han Min-su, a member of the National Assembly's Political Affairs Committee, by the Korea Housing Finance Corporation, the cumulative number of home equity pension enrollees stood at 162,498 as of the end of August. Based on last year's figure of about 7.73 million eligible households, the enrollment rate works out to approximately 2.1%.

The home equity pension allows homeowners aged 55 and older to use their property as collateral while continuing to live in it and receive monthly pension payments. Homes with a publicly assessed value of 1.2 billion won ($896,000) or below are eligible. With assessed values of apartment complexes rising this year, the number of eligible households is expected to remain flat or decline slightly from last year, meaning the enrollment rate is on track to exceed 2% for the first time.

The rise in the enrollment rate was driven by a jump in new sign-ups. From January through August, 12,427 new enrollees joined the program — already about 89% of the 13,925 who signed up over all of last year.

The Korea Housing Finance Corporation believes program improvements it announced early this year contributed to the increase. Starting March 1, the financial authorities raised average monthly payouts by 3.1% for new applicants and cut the upfront guarantee fee from 1.5% of the home's value to 1.0%.

Under the revised terms, a 72-year-old enrollee with a 400 million won home would receive 1.34 million won per month, up 41,000 won from the previous 1.3 million won. The upfront guarantee fee also fell from 6 million won to 4 million won, a reduction of 2 million won. The annual guarantee fee rate, however, rose from 0.75% to 0.95% of the outstanding loan balance. The changes to monthly payouts and guarantee fees do not apply retroactively to existing enrollees.

Still, South Korea's 2.1% rate compares unfavorably with the United States' 3.8% enrollment rate as of end-2024 — just over half the American figure. Nearly two decades after the home equity pension was introduced in South Korea, take-up among older homeowners remains limited.

Low awareness is cited as one of the main reasons. According to the KB Golden Life Report published last year, 33.4% of respondents said they had heard of the home equity pension but did not know the details, while 7.8% said they had never heard of it at all.

Expectations of rising home prices and a desire to pass property on to children also deter enrollment. The Korea Housing Finance Corporation said a common misconception among older homeowners is that joining the program means losing out if home prices rise. In practice, projected home price appreciation is factored into the monthly payout calculation, and any proceeds remaining after the outstanding loan balance is settled from the sale of the home after the enrollee's death are returned to the heirs.

Analysts say expanding enrollment will require further product improvements, such as raising monthly payouts further or linking payout amounts more directly to home price movements. Particular attention is needed to attract older homeowners in the Greater Seoul area and those with higher-value properties, they say.

"The home equity pension is a core welfare safety net that protects housing stability for older people while addressing retirement poverty," Han said. "We need to lower the barrier further by expanding practical incentives such as raising payout levels to realistic amounts, so that people do not hesitate to enroll out of misconceptions about home price fluctuations or inheritance."