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| A caregiver assists an elderly man at a nursing home, in this 2021 October file photo. Korea Times file |
By Lee Yeon-woo
Claiming the national pension early results in a reduced payout, leading to financial loss. Nevertheless, an increasing number of elderly Koreans are choosing to claim their pensions before the stipulated age. It is projected that the number will exceed one million by 2025.
One of the primary reasons driving early pension claims is the lack of funds for daily expenses. A man in his 60s, who asked to be identified by his surname Um, is one of them. He had worked in the design sector in heavy industries, like shipyards. However, as the industry struggled, he was compelled to leave the workplace since there was not any work for him.
"I used up the little savings that I had, and I could not get another job immediately. So I decided to receive the pension early," Um said.
According to data from the National Pension Service (NPS), there has been a consistent rise in early-age pension beneficiaries. The number increased to 765,342 in 2022, from 673,842 in 2020 and 714,367 in 2021.
The NPS anticipates that the number of such beneficiaries will surpass 1.07 million by 2025, with the total payout expected to reach approximately 10 trillion won ($7.4 billion).
The NPS indicates that unforeseen challenges such as sudden job losses, business downturns, or deteriorating health have hampered individuals from earning an income. Facing an urgent need to cover living expenses, many found themselves with no alternative but to claim their national pension early, the state agency noted.
Some even believe that early pension claims are a financially more wise decision than waiting. The financial gap between the time of retirement and when pension payouts commence, along with the contradiction of having to face a heavier health insurance burden due to pension income, has nudged many to file for early pension claims.
"Rather than waiting to get just an extra ten thousand or several thousand won (per month) later, it seemed more profitable to claim the amount now. After doing the math, I found that applying immediately was the most sensible choice," said Bae, a man in his 60s.
The early pension payouts system was introduced in 1999 to support individuals who retired before the official retirement age, or those facing financial challenges due to a low income. The system allows individuals to begin drawing payouts up to five years earlier than the standard eligible age. However, for each year that one opts to claim the pension ahead of schedule, the amount they receive is reduced by 6 percent annually.
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