Better-off households more likely to claim early pension than vulnerable ones, report finds

Among households navigating the income gap between retirement and the start of public pension payments, those that maintained stable incomes were more likely to claim their pensions early than households whose incomes had collapsed — a paradox in which the people most in need of a financial safety net are the least likely to access it.

According to a report released Monday by the Korea Institute for Health and Social Affairs on the income gap facing middle-aged and older adults, an analysis of Statistics Korea's Household Income and Expenditure Survey from 2019 to 2025 found that 26.5% of households that maintained or increased their incomes to at least the median level before retirement were receiving early public pension payments. By contrast, only 18.1% of vulnerable households — those whose incomes had fallen below half the pre-retirement median — were doing so.

The gap in benefit amounts was even wider. Households with stable or rising incomes received an average of 1.92 million won ($1,430) per month in public pension payments, 3.6 times the 527,000 won received by vulnerable households. The figures cover total pension receipts across all household members, including not only the national pension but also occupational pensions for civil servants, private school employees and military personnel. Given that the early old-age national pension carries a reduction of up to 30%, a monthly figure exceeding 1.9 million won is difficult to reach through the national pension alone. The high average for income-stable households likely reflects dual-income couples both drawing pensions, or households receiving large occupational pension payments.

The reduction structure of the early old-age national pension may have contributed to this disparity. The benefit is cut by 6 percentage points — 0.5 percentage points per month — for each year it is claimed early, meaning someone who draws the pension five years ahead of schedule receives 30% less for life. Claiming early while absorbing that reduction still requires a large enough base pension to cover living expenses, which in turn presupposes a long contribution history — typically 20 to 30 years of premium payments built up through sustained employment.

Among new early old-age pension recipients who had contributed to the national pension for 20 years or more, the share among men rose from 47.4% in 2014 to 77.2% in 2024. Among women, the figure rose from 16.2% to 34.7% over the same period. Vulnerable households whose incomes had sharply declined, by contrast, may find that even if they do claim early, the benefit is too small to cover basic living costs.

The desire to reduce national health insurance premiums has also driven some retirees toward early pension claims. The income threshold for dependent coverage under national health insurance was lowered from 34 million won to 20 million won (1.67 million won per month) annually, giving some retirees an incentive to claim their pension early and accept a reduced benefit in order to stay below the threshold and retain dependent status.

For vulnerable households, however, receiving more from the national pension can paradoxically yield little real income gain, as higher pension income may trigger reductions in the basic pension or cuts to livelihood benefits. The structure effectively weakens the incentive to contribute to the pension system and build up retirement income in the first place.

The report said the resources and means available to weather the income gap are distributed unequally across income groups. For households that can draw a comfortable pension even when claiming early, the gap period amounts to a gradual decline. For vulnerable households, it means severe household deficits — 72.5% of households whose incomes fell below half the pre-retirement level ran deficits — while being left outside the public pension safety net.

To address this inequity, the report recommended replacing the current all-or-nothing early pension system with a partial pension scheme that allows recipients to draw only as much as they need for as long as they need it. It also called for restructuring the links between early pension claims and other programs — including national health insurance and the basic pension — so that interactions among these systems do not distort people's choices.

In addition, the report said expanding unemployment credits and premium support for low-income earners to help build up their contribution records is an urgent preventive measure to ease the income cliff that vulnerable households face during the gap period.