Mandatory welfare outlays to rise average 6.8% annually through 2030, 0.1 percentage point faster than projected a year ago; national health insurance and long-term care costs also climbing; four major public pensions see slower growth

A visitor consults with a staff member at the comprehensive counseling center of the National Pension Service's Seoul Northern Regional Headquarters. [Yonhap]
A visitor consults with a staff member at the comprehensive counseling center of the National Pension Service's Seoul Northern Regional Headquarters. [Yonhap]

South Korea's mandatory spending on the basic pension — a program designed to support the livelihoods of the elderly — is projected to surpass 30 trillion won ($22.1 billion) by 2030.

The broader fiscal burden is expected to grow unavoidably as the share of the elderly population rises and prices climb. Mandatory outlays for the national basic livelihood security program and national health insurance are also set to increase.

According to political circles Sunday, the government's "2026–2030 National Fiscal Management Plan," recently submitted to the National Assembly, projects mandatory basic pension spending will reach 30.09 trillion won in 2030.

The government estimates the figure will grow at an average annual rate of 6.8 percent from this year through 2030 — up 0.1 percentage point from the 6.7 percent average annual growth projected a year ago for the 2025–2029 period.

Basic pension outlays stand at 23.14 trillion won in this year's base budget and are forecast to rise to 25.65 trillion won next year, 28.3 trillion won in 2028, 29.16 trillion won in 2029, and past 30 trillion won in 2030.

Compared with projections made a year ago, the new estimates are higher by 613.1 billion won (2.4 percent) for 2027, 1.2 trillion won (4.4 percent) for 2028, and 9.04 trillion won (3.3 percent) for 2029.

The increases appear to reflect a growing number of recipients, higher payment amounts, and changes to the payment structure.

In the fiscal management plan, the government said basic pension spending "is projected to grow at an average annual rate of 6.8 percent over the 2026–2030 period, driven by the restructuring toward a tiered benefit system, growth in the elderly population, rising prices, and improvements to the spousal reduction scheme."

The standard pension amount set under Article 5 of the Basic Pension Act was 342,510 won last year and rose 7,190 won, or 2.1 percent, to 349,700 won this year. Because the amount is indexed to inflation, it is expected to increase every year going forward.

Authorities have been working to shift the method for selecting basic pension recipients from a "target recipient rate" — based on the bottom 70 percent of earners — to an "income standard" linked to the median income, while also pursuing a restructuring that would give more to lower-income elderly people.

In line with that approach, the government's budget proposal for next year includes a plan to raise payments by 30,000 won to 380,000 won per month for the bottom 30 percent of elderly earners, a group of about 3.48 million people.

Married couples who both receive the basic pension currently have their individual payments reduced by 20 percent regardless of income. Under the proposed changes, the reduction rate for couples in the bottom 45 percent of earners — about 2.34 million people — would be cut to 10 percent.

People previously excluded from the basic pension because they receive an occupational pension will also become eligible if they fall within the bottom 45 percent of earners, a group of about 110,000 people.

The budget proposal for next year appears to reflect only the lower-end benefit increases — giving more to those with lower incomes — while leaving out the upper-end reductions that would cut payments for higher earners.

In this regard, a government official said earlier that even after the tiered restructuring, "existing recipients will face no disadvantage whatsoever," adding that "new recipients will be brought into the system under a revised median income standard."

Details of the restructuring remain undisclosed. On Aug. 27, Health and Welfare Minister Jeong Eun-kyeong canceled a scheduled briefing on the basic pension reform plan just one hour before it was set to begin, citing "certain matters that have yet to be decided."

Meanwhile, the national government's share of spending on the national basic livelihood security program is also set to rise sharply.

That figure stands at 22.47 trillion won in 2026 and is projected to grow at an average annual rate of 13.9 percent, reaching 37.84 trillion won by 2030. A year ago, the government had forecast average annual growth of 6.5 percent for the 2025–2029 period, but revised estimates accounting for increases in the median income standard, an expanding recipient base, and higher medical benefit costs have pushed the projection significantly higher. By 2029, the revised figure is 7.57 trillion won, or 28.8 percent, more than the estimate made a year earlier.

Mandatory national health insurance spending is also set to grow, rising from 13.8 trillion won in 2026 to 17.19 trillion won in 2030, for an average annual increase of 5.6 percent — up 2.2 percentage points from the 3.4 percent annual growth projected a year ago for the 2025–2029 period.

Spending on the long-term care insurance program — which provides institutional or in-home care benefits to people aged 65 or older, or those requiring at least six months of care due to age-related conditions such as dementia or stroke — is projected to reach 3.03 trillion won in 2030.

The government forecasts average annual growth of 4.0 percent for the 2026–2030 period, up 1.9 percentage points from the 2.1 percent annual growth projected a year ago for 2025–2029.

Combined mandatory spending on the four major public pension programs — the national pension, civil servant pension, private school employee pension, and military pension — stands at 93.93 trillion won this year and is projected to reach 121.12 trillion won by 2030, for an average annual growth rate of 6.6 percent. That is 1.8 percentage points lower than the 8.4 percent average annual growth projected a year ago for the 2025–2029 period.

Total mandatory spending is projected to grow at an average annual rate of 8.5 percent over the 2026–2030 period, up 2.2 percentage points from the 6.3 percent annual growth projected a year ago for 2025–2029.

Total mandatory outlays stand at 387.66 trillion won in this year's base budget and are projected to reach 426.76 trillion won in 2027, 471.85 trillion won in 2028, 511.84 trillion won in 2029, and 537.85 trillion won in 2030.

Compared with projections made a year ago, the new estimates are higher by 11.64 trillion won (2.8 percent) for 2027, 30.54 trillion won (6.9 percent) for 2028, and 46.12 trillion won (9.9 percent) for 2029.

Mandatory spending's share of total fiscal outlays is set to dip from 53.3 percent in 2026 to 52.0 percent in 2027 before climbing back to 53.5 percent by 2030.

The government attributed the rising scale and share of mandatory spending to "increases in statutory welfare outlays for pensions and healthcare driven by the deepening of low birth rates and aging, the expansion of local transfer funds linked to domestic tax revenue growth, and rising interest payments from the accumulation of national debt," and said it "plans to strengthen efforts to improve spending efficiency."


oskymoon@heraldcorp.com