"Up to 3.25 Million KRW per Month"?Is Retirement Worry-Free? National Pension Rises with Inflation

Average Monthly Payment Reaches 696,000 Won
Real Value Preserved by Reflecting Inflation

The surge in prices last year has been fully reflected in this year’s National Pension Service payments. As the government applied the principle of directly linking pension payments to the inflation rate, all public pension recipients will receive pensions increased by 2.1% starting this year. Amid ongoing high inflation, the function of public pensions in preserving their 'real value'-in contrast to private pensions-is once again drawing attention.

Image to aid understanding of the article. Getty Images Bank

Pension Payments Rise with Inflation... A Safety Net for Maintaining 'Real Value'

According to the Ministry of Health and Welfare and the National Pension Service on January 6, all public pension recipients will receive payments increased by 2.1% from last year, starting this month, in accordance with relevant laws and regulations. This increase directly reflects last year’s consumer price inflation rate and will be applied for one year, until December.

The National Pension Service is structured to adjust annual payments to prevent beneficiaries from being disadvantaged by currency depreciation. The National Pension Act and the Government Employees Pension Act, among others, stipulate that the previous year’s inflation rate must be reflected in pension payments. If inflation is not reflected, the amount of goods and services that can be purchased with the pension inevitably decreases, resulting in a 'decline in real value'.

Average Payment Rises by 14,000 KRW... Maximum Payment Increases by Over 60,000 KRW

The specific amount of increase varies depending on the size of the pension payment. As of September last year, recipients of the old-age pension who received an average of 681,644 KRW per month will now receive 695,958 KRW per month, an increase of 14,314 KRW. For the average recipient, this means an additional monthly income of around 14,000 KRW.

The higher the pension payment, the larger the increase. Recipients who previously received the maximum monthly payment of 3,185,040 KRW will now receive 3,251,925 KRW per month, an increase of about 67,000 KRW. Since the payment is adjusted in line with inflation, those receiving higher pensions see a greater absolute increase.

All Public Pensions Increase... Differentiation from Private Pensions

This increase applies not only to the National Pension Service but also to so-called 'special occupational pensions' such as the Government Employees Pension, Private School Teachers' Pension, and Military Pension. Here, the distinction between public and private pensions becomes clear. Most private pension products, such as individual pensions purchased through banks or insurance companies, pay out the amount agreed upon at the time of contract. If high inflation persists for an extended period, the real purchasing power of these pensions will inevitably decline.

In contrast, public pensions adjust payments in line with inflation, ensuring that the state preserves their real value. This is why the stability of public pensions stands out, especially in an environment where both aging and inflation are progressing simultaneously. A government official stated, "Since public pensions are designed to be linked to inflation, they will help ensure that people can maintain at least a minimum standard of living after retirement."