Elderly income up 80% in a decade, but pension gap triples

South Korea's elderly are moving away from relying on allowances from their children, with public pensions — the national pension and the basic pension — becoming the primary source of income in old age.

Annual income per elderly person rose roughly 80 percent over the past decade driven by public pensions, and the share of seniors receiving both the national pension and the basic pension nearly doubled.

Yet the income gap between those receiving the national pension and those dependent solely on the basic pension has widened to more than three times, underscoring the urgent need for measures to protect the most vulnerable elderly.

According to a report published in issue 121 of the National Pension Research Institute's "Pension Issues and Trend Analysis," total annual income for Koreans aged 66 and older rose 79.2 percent — from 7.75 million won ($5,560) in 2013 to 13.88 million won in 2023.

Family allowances shrink as public pensions account for 28% of elderly income

Public pensions were the single biggest driver of income growth among the elderly.

The share of public pension income — covering the national pension, the basic pension, and those receiving both simultaneously — in total elderly income rose from 16.5 percent in 2013 to 28.2 percent in 2023.

Over the decade, income from the national pension alone grew 177.5 percent and income from the basic pension rose 156.2 percent, while income among those receiving both jumped 299.7 percent.

By contrast, the share of private transfers — money received from children or other relatives — fell sharply, from 20.9 percent in 2013 to 12.1 percent in 2023. The actual amount of private transfer income grew just 3.9 percent over the same period.

The traditional model of relying on children's financial support in old age is giving way to a state-backed public income security system.

By pension type, the share of seniors receiving both the national pension and the basic pension jumped from 12.8 percent in 2013 to 23.5 percent in 2023. The share receiving only the national pension also rose, from 8.4 percent to 12.2 percent. The share receiving only the basic pension fell from 59.8 percent to 47.4 percent.

Annual income gap exceeds threefold between national pension and basic pension recipients

Despite the maturing of the public pension system, income inequality among pension recipient groups remains wide.

As of 2023, those receiving only the national pension had total annual income of 26.48 million won — 3.1 times the 8.41 million won recorded by those receiving only the basic pension. That was also 1.7 times the income of those receiving both pensions simultaneously (15.61 million won) and 1.5 times that of other groups, including occupational pension recipients and those receiving no pension (17.78 million won).

National pension recipients not only draw higher pension payments but also derive 56.9 percent of their income from employment and business activities, and earn relatively more from financial assets and real estate, giving them a diversified and stable income base.

Those relying solely on the basic pension had the lowest total income of any group, and the basic pension's share of their overall income soared from 20.1 percent in 2013 to 38.1 percent in 2023.

Their dependence on the basic pension is so high that losing it would immediately threaten their livelihoods. Their share of private transfer income was also the highest among all groups at 24.7 percent, indicating they still rely heavily on financial support from family.

"The expansion of public pensions has reduced elderly dependence on family and strengthened the income safety net, which is a positive development," the report said. "However, it is necessary to redefine the roles of the two systems in preparation for the rapidly growing number of people who will receive both."

The report also recommended that "more comprehensive and substantive retirement income security policy be established for low-income elderly who are entirely dependent on the basic pension and remain in an absolutely vulnerable income position."

thlee@heraldcorp.com