The government is strongly considering tightening the eligibility criteria for the basic pension, which currently targets the bottom 70% of income earners aged 65 and older, by shifting to a "median-income linkage" and adopting "differentiated payments by income bracket," according to reports on the 9th. Critics said there is a need to toughen the standard because this year's basic pension coverage extends to those just below the median-income tier.
The basic pension is currently designed so that the bottom 70% of income earners aged 65 and older can receive it. This year, a single-person household aged 65 or older can receive the basic pension if its recognized income is 2.47 million won or less per month. That means the basic pension is being paid even to income groups corresponding to 96.3% of the median income for a single-person household (2,564,000 won). Median income refers to the income level that stands in the middle when all citizens are lined up by income.
In addition, in practice, even among those aged 65 and older whose monthly income is higher than 2.47 million won, some may still be eligible for the basic pension. That is because the basic pension's recognized income reflects various deductions and is therefore calculated lower than actual monthly income.
If this structure continues, the basic pension's coverage could become too broad, increasingly straining public finances. Research estimates that if the current system is maintained, the share of the basic pension in the government budget will rise from 3.08% in 2024 to 6.07% in 2048.
Accordingly, the government is reviewing plans to tighten the basic pension eligibility standard of "the bottom 70% of income earners." The idea is to switch the benchmark to median income so that, unlike now, those at up to 96.3% of median income would no longer receive the basic pension. It is reported that a likely approach is to start from a threshold lower than 96.3% and then gradually lower the median-income ratio standard over time.
Along with this, the government is also said to be considering paying the pension differentially by income bracket among those eligible. It is a "more to the lower, less to the higher" approach in which lower-income groups receive more and higher-income groups receive less. Currently, the same amount is paid regardless of income level.
On the other hand, the government is reportedly not planning to touch, for the time being, the current age threshold of 65 and older for the basic pension. This is an issue linked to senior fare exemptions and extending the retirement age. Research shows that raising the basic pension age threshold would save 200 trillion to 600 trillion won by 2065.