[Retirement Extension, Time to Choose] Growing Pension Ineligibility Period... Rising Income Insecurity

As the gap between retirement age in the labor market and the age at which pension benefits begin widens, the period of income crevasse?when individuals have no income?continues to grow, leaving the elderly with persistent income insecurity. This is because while the age for receiving pension benefits has been gradually delayed, the retirement age has remained unchanged for a long time. Amid this situation, there is growing consensus that the official age defining the elderly should be raised, and there are calls for effective alternatives?such as extending the retirement age?to fill the widening income gap.

According to relevant government ministries on May 12, South Korea is experiencing a growing period during which retirees lack stable income due to the gap between the age at which they retire and the age at which they become eligible for pension benefits.

Following the first pension reform in 1998, the pension eligibility age was designed to increase by one year every five years from 60 to 65, between 2013 and 2035. Under this plan, those born before 1953 became eligible for the National Pension at age 60, those born between 1953 and 1956 at age 61 (effective in 2013), those born between 1961 and 1964 at age 63 (effective in 2023), those born between 1965 and 1968 at age 64 (effective in 2028), and those born after 1969 at age 65 (effective in 2033).

In contrast, the statutory retirement age has remained fixed at 60 since it was raised in 2016. As of this year, the retirement age is 60, but the age at which people start receiving the National Pension is 63, resulting in a three-year gap. By 2033, the pension eligibility age will rise to 65, extending the potential period of income discontinuity to five years. Because the retirement age has remained unchanged while the pension eligibility age has continued to rise, income insecurity is gradually increasing over time.

In reality, the period of income insecurity is estimated to be even longer. This is because a high proportion of workers leave their jobs involuntarily before reaching the official retirement age. According to the Korea Employment Information Service's Employment Trends Brief, as of 2024, the average age of early retirees was only 51.2 years. It also takes a considerable amount of time to find a new job after retirement. According to the Korea Labor Institute, workers who retired after age 45 took an average of 15.6 months to find reemployment.

In March, the ruling and opposition parties reached an agreement on pension reform for the first time in 18 years. The key points included raising the contribution rate from the current 9% to 13% and increasing the income replacement rate to 43%. Because the discussions focused on parametric reforms?adjusting the amounts paid in and received?there was no discussion about the income gap caused by the mismatch between the pension eligibility age and the statutory retirement age. There remain unresolved issues, such as extending the mandatory National Pension subscription period from the current age of 59 to 64, and creating institutional solutions to ensure that elderly people can engage in economic activity during the income gap period.

There is also growing consensus about raising the official age defining the elderly. As healthy life expectancy increases and rapid population aging drives up the cost of elderly welfare, there is a growing sense that the eligibility ages for benefits such as the Basic Pension and National Pension should also be raised. Not only the government but also academic experts agree that although the speed of change should differ by system, it is necessary to raise the age criteria. On May 9, a group of academic experts released a "Social Proposal by Private Experts on the Criteria for Defining the Elderly," suggesting that the age defining the elderly should be raised to 70, and that the eligibility ages for the National Pension and Basic Pension should be adjusted accordingly. They agreed that the National Pension eligibility age should be raised to 68 by 2048, and the Basic Pension eligibility age to 70 by 2040.

However, both experts and the government believe that for such an age increase to become a reality, a broad social consensus?including extending the retirement age?must come first. If only the pension eligibility age is postponed without providing solutions for elderly employment, poverty could worsen. Park Jaeun, a professor in the Department of Social Welfare at Hallym University, explained, "We must bring about changes to the social system, including extending the retirement age, reforming the wage system, and enabling reemployment after retirement."