South Korea's pension scheme was introduced relatively recently, compared to other democratic nations. Half of the country's population aged 65 and over lives in relative poverty, or nearly four times the 13% average for member countries of the Organisation for Economic Co-operation and Development (OECD). This makes old age poverty an urgent social problem. Public social spending by general government (the central, state, and local governments, including social security funds) is half the OECD average, and is the lowest as a percentage of GDP among OECD member countries.
South Koreans aged 65 or older may receive three types of pension income: social welfare, a public pension, and a private pension.
History
1990–2007
National health insurance was introduced in South Korea in 1977. By 1989 South Korea had universal health coverage. Other social insurance programmes include Industrial Accident Compensation Insurance (IACI) (South Korea's first social insurance program, introduced in 1964), and Employment Insurance (EI) (introduced in 1995).
The recent trend in South Korea is towards increased welfare spending. Between 1990 and 2007, South Korean government welfare expenditure increased at a rate of 11% per year in real terms, the fastest rate of increase in the OECD area. Social expenditure between 1990 and 2001 rose from 4.25% to 8.7%, peaking at 10.9% in 1998.
2007–present
In 2007, welfare spending in South Korea was 7.6% of GDP, compared to an OECD average of 19%. Welfare for the elderly amounted to 1.6% of GDP in the same year (a quarter of the OECD average).
The primary social welfare program in South Korea is the Basic Livelihood Security Programme (BLSP), which covers 3% of the country's population (about one fifth of the 15% of South Koreans living in relative poverty). Another program, the National Basic Livelihood Security System (NBLSS) was introduced in 2001.
In 2011, family benefits amounted to 0.5% of GDP, compared to an OECD average of 2.2%, and were the lowest in the OECD.
Pensions in South Korea are administered by the National Pension Service (NPS), introduced in 1988. It was reported that, in 2002, only 6.5% of South Koreans over the age of 60 lived on public pensions. Only about one fifth of the elderly population receives a pension, a major factor contributing to the relative poverty in which nearly half of South Korea's elderly live. This is the highest proportion among OECD countries.
Only a quarter of government welfare spending, in the form of cash payments, goes to the poorest 20% of the population. This is contributing to growing social inequality. The South Korean tax and welfare system is the least effective in reducing inequality among OECD countries.
Social welfare
Basic Livelihood Security Programme
The Basic Livelihood Security Programme (BSLP) is a welfare system that provides cash payments and other benefits, such as housing and education, for citizens living in absolute poverty. The programme was established in 1999, under the National Basic Livelihood Security Act. Absolute poverty occurs when income falls below the minimum cost of living. In 2011, it was reported that approximately 1.4 million people received benefits from the BLSP, of whom 380,000 were elderly. This accounts for only 6.3% of the Korean population over the age of 65.
Strict criteria for assistance under the Programme have resulted in ineligibility for many applicants. For this reason, the BSLP does not provide full cover for the elderly. To qualify, recipients must prove that they cannot receive possible assistance from family members, and must include their assets under the means testing and income criteria. There was some relaxation of the eligibility criteria in 2003, and in 2008 the program was expanded to include a Long-Term Care Insurance for the Elderly.
Basic Old-Age Pension
South Korea introduced its Basic Old-Age Pension in 2008. According to the Ministry of Health, Welfare and Family Affairs, the Basic Old-Age Pension is "designed to enhance welfare of the elderly by providing a monthly pension payment to the elderly in need." The pension was intended to benefit workers contributing to the National Pension Scheme.
By 2012, the pension was only covering 16% of the minimum cost of living, and benefited 67% of Korea's population over the age of 65. It was extended in 2014 to provide monthly allowances of approximately $179 (200,000 Korean won - KRW) to people over the age of 65 in the bottom 70th percentile of income earned. In 2014, approximately 4.9 million people benefited from this program.