The Share of Old-Age and Survivors' Benefits in Elderly Income in Korea Is Significantly Lower than in Eight European Countries

• ■In eight European countries, old-age and survivors' benefits account for 50-80% of elderly income, whereas in Korea they account for only 20-30%.

• ■Korea's old-age income security system covers fewer people with lower benefit adequacy (income replacement rate, minimum income guarantee) compared to the eight European welfare states. As a result, Korea's elderly poverty rate, at 22.3% (based on 40% of median income), is significantly higher than the rate of around 5% in these European countries.

• ■The high elderly poverty rate in Korea is largely due to the low income replacement rate of the National Pension and the insufficient level of the Basic Pension. To address this, the income replacement rate, the minimum income guarantee, and policy measures such as pension credits and contribution subsidies for old-age and survivors' benefits need to be strengthened.

KIHASA has published Issue & Focus No. 454, titled "Adequacy of Old-Age Income Security and Elderly Poverty in Korea and Eight European Countries." The brief was written by Senior Research Fellow Yeo Eu-Gene from the Department of Poverty and Inequality Research at KIHASA.

"This study compares the adequacy of old-age income security in Korea with that in eight European countries (Sweden, Finland, the Netherlands, the UK, Germany, France, Italy, and Greece), examining measures such as the level of public social spending, the coverage rate of old-age and survivors' benefits, the income replacement rate of public pensions, and minimum income security," said Senior Research Fellow Yeo, adding, "Through this analysis, we aim to draw implications for reforming Korea's old-age income security system."

Yeo highlighted that "as of 2019, Korea's public social spending on old-age and survivors' benefits accounted for only 3.5% of GDP, which is lower than the OECD average of 8.2% and well below the levels observed in major European countries, such as Germany (10.4%), France (13.9%), Sweden (9.3%), and Italy (16.0%)."

She also pointed out that "while old-age and survivors' benefits account for 50-80% of the income of elderly households in the eiht European countries, the figure is only 20-30% in Korea, which is a key factor contributing to poverty among the Korean elderly."

"As a result," she explained, "the elderly poverty rate in these European countries remains low at around 5% (based on 40% of median income), while in Korea it stands at 22.3%, a stark contrast. This is mainly due to the lower income replacement rate of the National Pension and the relatively insufficient level of the Basic Pension compared to the countries studied."

She concluded by emphasizing that "in order to enhance the redistributive function of pensions over the life cycle, Korea should implement a comprehensive set of policy measures, such as increasing the National Pension contribution and its income replacement rate, strengthening the minimum guarantee function of old-age income security, extending the effective contribution period by expanding contribution subsidies, increasing pension credits, and raising the contribution age."