The amount of pension that an average worker in South Korea receives after retirement is far below the average of Organization for Economic Cooperation and Development (OECD) member countries.
Because the monthly insurance premium rate is only half that of advanced nations, the pension payout itself is small. This has led to criticism that the public pension system is failing to fulfill its role of ensuring income security in old age.
According to an analysis of the OECD's "Pensions at a Glance 2025" report by the National Pension Research Institute on July 10, South Korea's mandatory pension contribution rate (as of 2024)—which employees and employers split equally—is 9 percent. This is half the average of 18.8 percent among the 38 OECD member countries.
Italy has the highest rate at 33 percent, while Mexico has the lowest at 8.456 percent, placing South Korea among the lowest.
Because the pension premiums paid are low, the pension benefits received in retirement are inevitably insufficient.
Looking at the income replacement rate, which shows how much of one's pre-retirement income is covered by a pension after retirement, the National Pension income replacement rate for an average South Korean worker was only 33.4 percent.
Although this is a 2.2 percentage point (p) increase from the previous survey, it remains significantly lower than the member country average of 43 percent.
Ultimately, as the public pension fails to serve as a reliable safety net, elderly Koreans are being forced back into the workforce to make a living even after retirement.
An examination of the income structure of elderly households in South Korea shows that income from government subsidies, such as the National Pension, accounts for only 29.1 percent of their total income, while nearly half, 49.9 percent, comes from direct labor.
This is the exact opposite of the structure in other member countries, where elderly people rely on public pensions for an average of 55.9 percent of their income, with labor income accounting for only 27.0 percent.
As the pension system fails to function properly and retirement income remains insufficient, elderly Koreans are suffering from severe poverty.
The income poverty rate for the elderly population in South Korea is 39.7 percent, more than double the member country average of 14.8 percent, marking the most severe level among them.
Conditions worsen with age, with the poverty rate for those aged 76 and older reaching 54.0 percent, and the poverty rate for elderly women standing at 45.0 percent, which is higher than that of men.
The government has implemented major reform measures to overcome these limitations in the pension system.
First, it halted the existing plan that would have gradually reduced the retirement payout for those who completed 40 years of coverage, and instead raised the income replacement rate from 40 percent to 43 percent.
To secure the necessary funds, the National Pension premium rate, which had been capped at 9 percent, will be raised by 0.5 percentage points annually over eight years to 13 percent. As part of this, the rate increased to 9.5 percent starting this year.
The "childbirth credit" benefit, which grants additional coverage periods for giving birth, has been expanded to apply from the first child, and low-income regional subscribers will receive support for up to 12 months of insurance premiums over their lifetime.
Advanced countries abroad are also refining their systems to ensure stable retirement income.
The Czech Republic is in the process of raising the pension eligibility age to 67, while Ireland has introduced a system that provides higher pension amounts for those who delay their receipt.
Japan has raised the threshold for suspending pension payments from 510,000 yen to 650,000 yen per month, ensuring that retirees do not see their pensions reduced even if they continue to work, thereby strengthening their retirement income.
(Photo: Yonhap News)