The government has unveiled a plan to overhaul South Korea's basic pension around larger payments for lower-income recipients, but seniors in the bottom 45% of the income distribution will effectively see their benefits cut in the first quarter of next year. They will receive 349,700 won a month, the same as this year, rather than the 358,790 won that would reflect inflation. The government will raise payments for low-income recipients starting in April but has decided not to retroactively pay the inflation adjustment missed in the first quarter.
According to an analysis of next year's basic pension budget documents submitted by the Ministry of Health and Welfare to Rep. Lee Dal-hee of the People Power Party on the 6th, the government will freeze the standard pension amount — the maximum payment — for all recipients at 349,700 won a month from January through March, unchanged from this year. Under the current system, the payment should rise to 358,790 won a month from January to reflect an inflation rate of 2.6%.
From April, when the tiered payments begin, the maximum payment for the bottom 30%, or 3.63 million people, will rise to 380,000 won a month, while 1.538 million people in the bottom 30% to 45% bracket will receive 358,790 won a month. But all 5.168 million recipients in the bottom 45% will go without the inflation adjustment that current law requires from January for the entire first quarter. That amounts to 9,090 won a month, or 27,270 won over three months, and the shortfall will not be paid retroactively after April.
The government says that if the National Assembly passes the amendment to the Basic Pension Act in early December, revising the enforcement decree and overhauling the computer system will take at least three months, making April the earliest possible start date. Critics counter that because the overhaul is billed as strengthening support for low-income seniors, the ministry should have prepared the system changes in advance to narrow the first-quarter gap. Others say delaying the new system until April is a separate matter from withholding the inflation adjustment required under current law for those three months.
Retroactive payment was also considered within the government but was reportedly not adopted because of the added fiscal burden and concerns about fairness relative to other income brackets. "If we pay the first-quarter adjustment late, it could raise fairness issues with the bottom 45% to 70% bracket, whose standard pension amount stays frozen even after April," a government official said. "There is a precedent: in the 2019 overhaul that raised the basic pension for the bottom 20% of income earners to 300,000 won a month, the same amount as the previous year was paid from January through March, with the increase applied from April."
But because the tiered structure itself presumes differentiated support by income bracket, invoking fairness with higher brackets to justify withholding the inflation adjustment for the bottom 45% is seen as unpersuasive.
The bigger problem is that even when the maximum payment for the bottom 30% rises to 380,000 won a month in April, the poorest seniors will not receive the full benefit of the increase. Basic pension payments count as income for seniors who receive livelihood benefits, so their livelihood benefits are reduced by the same amount. Last year, 783,000 people aged 65 and over received both livelihood benefits and the basic pension, and 99.8% of them had their livelihood benefits reduced.
"This is billed as an overhaul tilted toward the poor, yet for the poorest seniors on livelihood benefits the increase disappears through benefit reductions, and seniors in the bottom 45% will not even get three months' worth of inflation adjustment," Lee said. "The government should reflect inflation in January through March as current law requires, and the amendment to the Basic Pension Act should include a safeguard so that the increase actually reaches seniors receiving livelihood benefits."
