South Korea

South Korean National Pension System

South Korean National Pension System

The South Korean was created to provide benefits to persons reaching old age, families and persons stricken with death of their primary breadwinner, and for the purposes of stabilizing its nations welfare state. South Korea's pensions system structure is primarily based on taxation and is income-related. In 2007 there was a total of 18,367,000 insured individuals with only around 511,000 persons excluded from mandatory contribution. The current pension system is divided into four categories distributing benefits to participants through national, military personnel, governmental, and private school teacher pension schemes. The national pension scheme is the primary welfare system providing allowances to the majority of persons. Eligibility for the national pension scheme is not dependent on income but on age and residence, where those between the ages of 18 to 59 are covered. Any one who is under the age of 18 are dependents of someone who is covered or under a special exclusion where they are allowed to alternate provisions. The national pension scheme is divided into four categories of insured persons – the workplace-based insured, the individually insured, the voluntarily insured, and the voluntarily and continuously insured.

Employees between the ages of 18 to 59 are covered under the workplace-based pension scheme and contribute 4.5% of their gross monthly earnings. The national pension covers employees who work in firms that employ five or more employees, fishermen, farmers, and the self-employed in both rural and urban areas. Employers are also covered under the workplace-based pension scheme and help cover their employees obligated 9% contribution by providing the remaining 4.5%. Anyone who is not employed, of the age of 60 or above, and excluded by article 6 of the but of the ages between 18 and 59, is covered under the individually insured pension scheme. Persons covered by the individually insured pension scheme are in charge of paying the entire 9% contribution themselves. Voluntarily insured persons are not subjected to mandatory coverage but can choose to be. This category comprises retirees who voluntarily choose to have additional benefits, individuals under the age of 27 without income, and individuals whose spouses are covered under a public welfare system, whether military, governmental, or private school teacher pensions. Like the Individually insured persons, they too are in charge of covering the full amount of the contribution. Voluntarily and continuously insured persons consists of individuals 60 years of age who want to fulfill the minimum insured period of 20 years to qualify for old age pension benefits. Excluding the workplace-based insured persons, all the other insured persons personally cover their own 9% contribution.

South Korea's old-age pension scheme covers individuals age 60 or older for the rest of their life as long as they have satisfied the minimum of 20 years of national pension coverage before hand. Individuals with a minimum of 10 years covered under the national pension scheme and who are 60 years of age are able to be covered by under a 'reduced old-age pension' scheme. There also is an 'active old-age pension' scheme that covers individuals age 60 to 65 engaged in activities yielding earned income. Individuals age of 55 and younger than 60 who are not engaged in activities yielding earned income are eligible to be covered under the 'early old-age pension' scheme. Around 60% of all Korean elders, age 65 and over are entitled to a 5% benefit of their past average income at an average of 90,000 (KRW). Basic old-age pension schemes covered individuals 65 years of age who earned below an amount set by presidential order. In 2010, that ceiling was 700,00 KRW for a single individual and 1,120,000 for a couple, equivalent to around $600.00 and $960.00.