Basic Pension Cut Significantly for National Pension Recipients; 80.4 Billion Won Reduced Last Year

South Korea's basic pension payments are being significantly reduced for recipients of the National Pension, with the total amount deducted nearly tripling in the past four years to over 80.4 billion won last year.

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(The linkage) creates a tension between the policy objectives of the two pension schemes.

This linkage, where higher National Pension payouts lead to lower basic pension benefits, has affected more than 842,000 individuals, more than double the number in 2021. The system reduces basic pension benefits by up to 50% if a recipient's National Pension income exceeds 150% of the basic pension's standard amount (349,700 won for a single household this year).

The National Pension is an earnings-related insurance benefit, while the basic pension is a non-contributory public assistance program funded by taxes. However, their interconnected reduction mechanism is drawing criticism for potentially undermining the goal of providing a minimum income guarantee for the elderly.

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The structure where the basic pension decreases as the National Pension payout increases can have the effect of offsetting part of the income secured through premium payments.

According to a report by the National Assembly Budget Office, the current system creates a tension between the policy objectives of the two pension schemes. It suggests that as National Pension benefits increase, a portion of the income secured through additional insurance premium payments can be offset by the reduction in basic pension payments.

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The relationship between the basic pension and the National Pension should be approached from the perspective of the structure and role distribution of the public pension system as a whole, not just a simple benefit adjustment issue.

The Budget Office recommends a fundamental review of the relationship between the two systems, advocating for a clearer division of roles. It suggests that the basic pension should focus more on minimum income security, while the National Pension should concentrate on income security based on contributions. This approach aims to ensure that the public pension system effectively supports the elderly without creating counterproductive outcomes.

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In the long term, it is necessary to clearly establish the roles between the systems, with the basic pension focusing more on minimum income security functions, and the National Pension taking charge of income security functions based on insurance contributions.