Basic Pension Cuts Surge Threefold in Four Years Due to National Pension Benefits

Reduction Exceeds 80 Billion Won Last Year
Number of Beneficiaries More Than Doubles to 840,000

The total amount of Basic Pension reduced due to the receipt of National Pension benefits has soared threefold over the past four years, surpassing 80 billion won last year.

According to a survey by the National Assembly Budget Office on August 23, as of the end of last year, the total amount of Basic Pension reduced in association with National Pension benefits amounted to 80,440,620,000 won. This figure is about 2.9 times higher than the 27,615,740,000 won recorded in 2021. During the same period, the number of beneficiaries whose Basic Pension was reduced more than doubled, increasing from 389,000 to 842,000. When converted into simple figures, the annual reduction per beneficiary increased from approximately 71,000 won in 2021 to about 96,000 won last year.

Citizens moving near Nakwon Shopping Center in Jongno-gu, Seoul. Photo by Yonhap News Agency

The current Basic Pension system either includes the amount received from the National Pension in the recognized income or reduces the amount of Basic Pension paid when a certain threshold is exceeded. On the surface, the National Pension is a contributory social insurance based on members' insurance contributions, while the Basic Pension is a non-contributory public assistance paid with tax revenue. However, in reality, these two systems are interconnected. In other words, the longer a person has contributed to the National Pension or the higher their pension benefits, the greater the likelihood of a reduction in their Basic Pension. Even if income levels are the same, differences in the duration of participation and the amount received from the National Pension lead to changes in Basic Pension payments, which ultimately creates disparities in the total amount of public pension benefits received.

Regarding this, the National Assembly Budget Office pointed out, "While the Basic Pension was designed to reflect the level of National Pension benefits as part of the process to guarantee a minimum income, this has resulted in a conflict in the policy objectives of the two systems." The Office also analyzed that "since the structure now reduces the Basic Pension as National Pension benefits increase, there can be a side effect where a portion of the income earned from faithfully paying insurance premiums disappears due to the reduction of the Basic Pension."

Due to these flaws, previous studies have also criticized the National Pension-linked reduction mechanism for undermining incentives to participate in the National Pension system and reducing trust in the overall program, rather than achieving significant fiscal savings. Of greater concern is that, as Korea faces rapid aging and the National Pension system enters a more mature phase, the number of beneficiaries subject to such reductions could surge further in the future.

Oh Gunho, co-president of the Welfare State Make Together, explained, "The number of people who have long participated in the National Pension is steadily increasing, which means more and more will be subject to Basic Pension reductions. While one could justify pension reduction as a form of solidarity for those at the center of the workforce benefiting from the National Pension, if future premium rates rise and National Pension benefits decrease, it would be right to abolish the reduction system altogether."

The National Assembly Budget Office repeatedly emphasized, "The relationship between the Basic Pension and the National Pension should not be seen as a simple matter of benefit adjustment, but must be approached from the perspective of the overall structure and division of roles within the public pension system. In the long term, the Basic Pension should focus more on its function of guaranteeing a minimum income, while the National Pension should take responsibility for income security based on insurance contributions, with each system’s role being clearly defined."

This content was produced with the assistance of AI translation services.