Basic Pension Reform Returns to the Hands of the National Assembly

35,000 to 380,000 Won in Differentiated Payments Planned Next Year

Legal Amendments Required for Implementation

Deep Divisions Remain in Politics over "Ha-hu-sang-bak" Reform

With the suspension of the government-led “Ha-hu-sang-bak” (thicker support at the bottom, thinner at the top) reform of the Basic Pension, the responsibility for pension reform has now shifted to the National Assembly. The government had included the plan to differentiate the amount of basic pension by income bracket in the budget; however, implementing this would require a revision of the relevant laws, and so its fate is now in the hands of the National Assembly. Close attention is being paid to whether lawmakers can come up with solutions that balance fiscal concerns and the policy goal of ensuring income security for impoverished elderly citizens.

According to next year’s budget proposal submitted by the government to the National Assembly on September 3, the administration has decided to maintain the current eligibility for basic pension, which provides the pension to the bottom 70% income bracket among seniors aged 65 and older. President Lee Jaemyung had previously ordered a review of ways to provide a more substantial basic pension to low-income seniors. Accordingly, the Ministry of Health and Welfare reportedly considered a plan to gradually lower the eligibility threshold to “80% of the median income or below” by 2030, while strengthening support for the lower-income groups. However, this plan was ultimately put on hold, largely out of concern over potential public backlash.

The Government’s Ha-hu-sang-bak Proposal

This year’s basic pension eligibility threshold for a single recipient is 2.47 million won, whereas 80% of median income is around 2.05 million won. Although the calculation methods differ and direct comparison is not possible, the current system determines benefits based on seniors’ income, whereas the median income benchmark applies to the entire population, which places relatively low-income seniors at a disadvantage.

According to Progressive Party Assemblyman Jeon Jongdeok’s remarks at the National Assembly’s Special Committee on Pension Reform, the existing pension standard corresponds to 96% of the median income. Had the government’s original reform plan moved forward, a gradual reduction in the number of eligible recipients would have been inevitable.

The Basic Pension Plan Currently Pursued by the Government

In the end, faced with political opposition and public backlash, the eligibility for recipients will remain set at the bottom 70% income bracket. However, the government decided to introduce a differentiated payment system across three income tiers. For the approximately 2.9 million people in the 45% to 70% income bracket, who are relatively better off, the pension will remain at 350,000 won per month, the same as this year. For the 1.74 million people in the 30% to 45% bracket, benefits will increase by 9,000 won to 359,000 won, reflecting price increases. For the lowest-income group—3.48 million people in the 0% to 30% bracket—benefits will rise by 30,000 won to 380,000 won per month.

This approach differs from the current Basic Pension Act’s method for calculating pension amounts. The law stipulates that the previous year’s basic pension amount should be adjusted by the consumer price inflation rate. However, for the 45–70% bracket, benefits will be frozen rather than indexed to inflation, while additional support will be given to lower-income groups. The Ministry of Health and Welfare has pledged to complete the necessary legislation within the year in relation to this plan.

Additionally, the ministry intends to reduce the 20% pension reduction for couples currently applied to the bottom 0–45% income bracket (2.34 million people) to 10%. The system will also be adjusted so that recipients of occupational pensions and their spouses who fall into the low-income category will become eligible for basic pension benefits.

Basic Pension Reform Returns to the National Assembly

As a result, the responsibility has returned to the National Assembly. Last month, on August 21, the National Assembly’s Special Committee on Pension Reform heard a report from the civilian advisory committee, which revealed differing perspectives on the basic pension issue. Park Myeongho, co-chair of the advisory committee and professor of economics at Hongik University, argued, “Ultimately, the national pension system should be reformed into a sustainable model where payouts correspond to contributions, and the number of basic pension recipients should be reduced. However, we should strengthen protections for those elderly individuals in the most difficult situations, and create a labor market and pension system that allow people to work longer and better prepare for retirement.”

On the other hand, the other co-chair, Joo Eunseon, professor of social welfare at Kyonggi University, stated, “There was no consensus on the direction of basic pension reform from the perspective of enhancing benefits. Given the controversial nature and massive scale of the basic pension, overhauling its logic is extremely challenging. For this reason, before fundamentally overhauling the basic pension, we discussed the need to quickly introduce supplementary income support for low-income seniors.” In other words, even within the advisory committee, no agreement has been reached regarding the proper direction for basic pension reform. Additionally, Professor Joo emphasized the need to develop separate complementary measures in connection with basic pension reform.

On this issue, National Assembly Deputy Speaker Nam Insun (of the Democratic Party) also remarked at the March session of the pension committee, “When undertaking a Ha-hu-sang-bak reform, since the national pension system is not yet sufficiently mature, basic pension eligibility could decrease among middle to upper income seniors (those roughly in the 4–6th income deciles) who are more dependent on the national pension.” She added, “It is necessary to develop scenarios for both the pace and direction of basic pension reform in conjunction with the level of maturity of the national pension system.”

Deputy Speaker Nam cited the 21st Advisory Committee’s report at this meeting, stating, “Short-term, the quasi-universal approach to the basic pension should be maintained, but in the future, benchmarks should be set at 100% of median income, with differential payments determined by income classes.”

However, discussions pertaining to basic pension reform remain divided even within the same political party. For example, Assemblyman Woo Jaejun of the People Power Party argued in the March session of the pension committee, “Even those who own a single Eunma Apartment are eligible for basic pension, which means that even non-poor seniors receive it.” In contrast, party member Assemblyman Ahn Cheolsoo criticized the government on August 28 via social media, stating, “For those in their 50s and 60s who have worked diligently and paid their taxes honestly throughout their lives, the Lee Jaemyung government is unfairly denying them even the right to receive a 350,000 won basic pension.”

What lies ahead for the debate? An official from the pension committee commented, “The responsibility for basic pension reform has returned to the National Assembly. We will need to seek improved solutions by linking basic pension, the national pension system, and the basic livelihood security system.”

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