With President Lee Jae Myung proposing to change the current basic pension system’s ‘flat-rate payment’ method, discussions on restructuring the basic pension are expected to accelerate. The government is reviewing a shift to a ‘ha-hu-sang-bak’ structure that pays more generously to poor seniors. Observers warn that increasing the basic pension amount could raise concerns about insufficient funding, while narrowing eligibility could leave near-poor seniors in blind spots, necessitating a finely tuned policy design.

According to the Ministry of Finance and Economy and others on the 24th, the current basic pension pays a flat monthly 349,700 KRW to seniors aged 65 or older in the bottom 70% by income. Eligibility thresholds are a recognized monthly income of up to 2.47 million KRW for single-person households and 3.952 million KRW for couple households. Because one only needs to meet the bottom-70% criterion, people can receive the pension even if they have some income or own high-priced housing. For example, a senior whose only income is wages of up to 4.68 million KRW per month, with no other income or assets, can qualify; likewise, an elderly couple with no income who own an apartment with an official appraised value of 1.2 billion KRW (market price 1.7 billion KRW) can also receive it.

President Lee pointed out that the flat-rate scheme has limits in alleviating elderly poverty. On the 16th, he wrote on X, “Seniors with monthly incomes of several million won and seniors with zero income receive the same basic pension amount,” adding, “To reduce elderly poverty that even drives people to suicide, it seems we need to change the basic pension somewhat.”

South Korea’s elderly poverty rate is the highest among member countries of the Organisation for Economic Co-operation and Development (OECD). According to ‘Korea’s Social Trends 2025’ published by the Ministry of Data and Statistics, the income poverty rate among Koreans aged 66 and over is 39.7%, about three times the OECD average of 14.8%. Under the current design, it is difficult to bolster only the incomes of lower-income seniors, and dramatically increasing everyone’s basic pension would impose a heavy fiscal burden.

The rapid pace of population aging also burdens the basic pension system. A report published last September by the Korea Institute for Health and Social Affairs projects that Korea’s population aged 65 and older will nearly double from 10.6 million in 2025 to 19.0 million in 2050. The number of basic pension recipients is also expected to increase from 7.19 million to 13.0 million. If the current payment structure is maintained, basic pension expenditures are projected to peak at 46 trillion KRW (1.48% of GDP) in 2050 from 27 trillion KRW (1.09%) in 2025, and still remain around 43 trillion KRW (1.33%) in 2070.

In light of these constraints, the government and academia have largely discussed two reform directions. One is a ‘minimum income guarantee’ model that narrows eligibility while providing larger amounts to low-income seniors. The other is a ‘universal basic pension’ model that pays the same amount to all seniors.

The Evaluation Committee on the Adequacy of the Basic Pension under the Ministry of Health and Welfare proposed in 2023 a reform toward the minimum income guarantee model. Instead of the current ‘bottom 70% by income’ criterion, it would apply an absolute threshold such as ‘at or below 100% of the standard median income,’ thereby shrinking the target group while raising the basic pension amount. With such a reform, as future seniors’ incomes and National Pension participation rates rise, the number of basic pension recipients would gradually decline. The committee also proposed raising the monthly basic pension to around 400,000 KRW and differentiating payments by income.

If the selection criteria are linked to the standard median income, how much more could be given to lower-income groups using the savings? In its report ‘Directions for Reforming the Basic Pension Selection Method’ published last February, the Korea Development Institute (KDI) analyzed that changing the criterion to ‘at or below 100% of the median income’ would reduce the recipient share from 70% of all seniors to about 57% by 2070. In return, the government could save an average of 4.25 trillion KRW per year. In that case, basic pension spending in 2070 would be 35 trillion KRW, 19% less than under the current system. Using the resources thus secured, KDI estimated the basic pension could be raised to about 441,000 KRW starting in 2026 without additional fiscal input.

If the criterion were lowered further to ‘at or below 50% of the median income,’ the recipient share would fall to about 37% of all seniors, while the basic pension could be raised to above 500,000 KRW starting this year without extra fiscal outlays. The idea is that shifting from ‘giving less to many’ to ‘thickly supporting the lower tier’ could yield larger gains in reducing elderly poverty without greatly increasing fiscal costs.

However, narrowing eligibility would create people who previously qualified for the basic pension but would no longer receive it. In particular, the near-poor could be left out, which is a drawback. Rep. Nam In-soon, who chairs the Democratic Party of Korea’s pension reform special committee, said at the committee’s plenary meeting on the 18th, “If we switch to a minimum income guarantee method, seniors in the bottom 4060% income bracket could fall into blind spots,” adding, “We need to carefully calibrate the pace and direction of reform in connection with the maturity of the National Pension.”

President Lee’s ‘ha-hu-sang-bak’ proposal has the advantage of avoiding blind spots, but the drawback is that it requires massive fiscal resources. His approach would first maintain the existing structure of paying the bottom 70% by income, while applying the ha-hu-sang-bak method only to future increases. For this reason, many in academia believe that once the payment method shifts to the ha-hu-sang-bak approach, eligibility will inevitably have to be reduced in the long run unless taxes are raised to secure funding.

Civil society groups are, for now, welcoming the discussion on basic pension reform, viewing the very first step in the debate as important. In a statement on the 16th, ‘The Welfare State We Make’ said, “If the basic pension is converted to a minimum guaranteed income method, the poorer you are, the more pension you will receive, yielding a strong effect on improving the incomes of poor sniors,” adding, “It is a system well suited to Korea, where population aging is fast and the elderly poverty rate is high.”