Why is redefining old age important for Korea's pension reform?

By Lee Yeon-woo

Twenty percent of Korea's population is now 65 or older, officially earning the country the status of a "super-aged" society. By 2070, when today's 20-year-olds turn 65, the proportion of the older adult population to working-age population (aged 18 to 64) is projected to go up by 100 percent.

The largest component of the country's welfare system is the basic pension, which is fully funded by taxes and provided to the bottom 70 percent of income earners among adults aged 65 and older. In 2025, individuals earning less than 2.28 million won ($1,585) will be eligible for the pension.

Just as baby boomers, with substantial assets and incomes, are entering this demographic, the eligibility threshold has been significantly raised, sparking concerns about fairness and the fiscal sustainability of the system.

"There are younger individuals earning less than the elderly receiving basic pensions. Imposing taxes on them to fund the pensions for seniors inevitably raises issues of fairness," Kim Woo-chang, a KAIST professor who participated in the government's pension reform discussions, said.

"The system should be gradually reformed to limit payments to senior citizens living below the poverty line."

At the same time, the government's mandatory expenditures are expected to grow from 347.4 trillion won in 2024 to 433.1 trillion won by 2028, with their proportion of total expenditure increasing from 52.9 percent to 57.3 percent.

Consensus is growing that raising the age threshold is an inevitable step to better align with the fact that life expectancy for Koreans has been increasing.

The Ministry of Health and Welfare announced plans to initiate discussions this year on revising the current older adult age threshold of 65, following a request from the Korea Senior Citizens Association.

If the age for defining who is an older adult is raised, discussions about extending the retirement age and reforming the pension system are likely to gain momentum.

The National Assembly Budget Office recently estimated that raising the basic pension eligibility age from the current 65 to 70 could reduce annual fiscal expenditures by about 6.8 trillion won.

Experts recommend the fiscal savings from this change should be reinvested as a catalyst to facilitate a transition into an "active aging" society.

"Raising the age threshold for the elderly should not be viewed as a reduction in welfare but rather as a shift toward a system that more aligns with the realities of a super-aged society," Lee Sang-rim, senior researcher at Seoul National University's Population Policy Research Center, said. "The financial savings from this process should be directed toward supporting the transition."

Efforts to address the issue have been made multiple times, but progress has been lackluster due to the older adult poverty rate.

According to the OECD, Korea's elderly poverty rate is the highest among its member countries. The country is the only one where the rate surpassed the 40 percent level.

"Discussions on a super-aged society should not focus solely on welfare expansion," Lee said. "Raising the age for senior citizens is tied to challenges that necessitate changes to existing lifestyles, including extending the retirement age and implementing reeducation systems."