The Ministry of Health and Welfare announced on June 16 that it will implement a revised law significantly easing the income thresholds for reductions in old-age pensions starting June 17. Under the new regulations, the income limit for pension recipients will rise from 3.19 million won to 5.19 million won, allowing beneficiaries to receive their full pension even if they earn income below this threshold.
The old-age pension reduction system has been in place since the introduction of the National Pension Scheme in 1988, aimed at balancing adequate retirement income with the financial sustainability of the fund. Under the previous system, pensions could be reduced by up to 50% if income exceeded a certain level within five years of starting to receive benefits.
However, due to increased medical and living costs associated with longer life expectancies and the need for older adults to remain in the workforce, the government has prioritized reforming the pension system as part of its national agenda to improve the National and Basic Pension systems. This marks the first adjustment to the reduction criteria since the system's inception.
The key change in the revised law is the increase of the reduction threshold, referred to as the 'A value.' The A value represents the average monthly income of all National Pension subscribers over the previous three years, which is set at 3.19 million won for 2026. Previously, if a recipient's income (after deductions for work-related expenses) exceeded the A value, their pension was reduced based on a tiered system. Starting June 17, the threshold will be adjusted to 'A value + 2 million won (5.19 million won).'
As a result, the lower two income tiers, which previously applied to those earning between the A value and 4.19 million won, will be eliminated. Only recipients earning above 5.19 million won will continue to face reductions based on the previous formula.
The old-age pension reduction system has been in place since the introduction of the National Pension Scheme in 1988, aimed at balancing adequate retirement income with the financial sustainability of the fund. Under the previous system, pensions could be reduced by up to 50% if income exceeded a certain level within five years of starting to receive benefits.
However, due to increased medical and living costs associated with longer life expectancies and the need for older adults to remain in the workforce, the government has prioritized reforming the pension system as part of its national agenda to improve the National and Basic Pension systems. This marks the first adjustment to the reduction criteria since the system's inception.
The key change in the revised law is the increase of the reduction threshold, referred to as the 'A value.' The A value represents the average monthly income of all National Pension subscribers over the previous three years, which is set at 3.19 million won for 2026. Previously, if a recipient's income (after deductions for work-related expenses) exceeded the A value, their pension was reduced based on a tiered system. Starting June 17, the threshold will be adjusted to 'A value + 2 million won (5.19 million won).'
As a result, the lower two income tiers, which previously applied to those earning between the A value and 4.19 million won, will be eliminated. Only recipients earning above 5.19 million won will continue to face reductions based on the previous formula.
The revised criteria will be retroactively applied to income earned in 2025. Beneficiaries whose income was below 5.08 million won (the 2025 A value + 2 million won) but who had their pensions reduced will be eligible for a full refund of the deducted amounts.
The refund process will be automatic, requiring no separate application from beneficiaries. The National Pension Service will begin processing refunds sequentially starting at the end of July, once it receives confirmed tax data from the National Tax Service. Beneficiaries can also choose to submit their tax documents directly to the service for refunds. Additionally, those previously excluded from reductions will automatically receive the 2025 dependent family pension amounts (20,520 won for spouses, 16,680 won for parents and children) as part of the refund.
For income earned in 2026, the ministry proactively applied the new threshold starting in January to avoid administrative complications associated with 'pre-reduction and post-refund' processes. Currently, if a beneficiary reports income below 5.19 million won for 2026, any reductions have already been halted. This system allows for a two-step process: first, halting reductions based on reported income, and second, adjusting based on confirmed tax data from the National Tax Service.
The Ministry of Health and Welfare estimates that about 100,000 beneficiaries, representing approximately 65% of those previously subject to reductions, will be able to receive their full National Pension benefits due to these changes. As of May 2026, 90,000 individuals (66.4% of those affected) received an additional 19.5 billion won in pension payments due to the pre-reduction halt, averaging about 50,000 won per person. The number of beneficiaries eligible for refunds for 2025 income is also estimated at around 100,000 (66.3%), with a total refund amounting to 44.5 billion won (approximately 600,000 won per person for 12 months).
The impact of the relaxed criteria on the overall financial health of the National Pension Fund is expected to be minimal. Although the number of beneficiaries affected by the elimination of the first two income tiers accounts for 65% of the total, the amount previously deducted from them represents only 15% of the total 279.1 billion won.
Among OECD member countries, South Korea, Japan, and Spain are the only nations that reduce pensions based on income activities, with Japan's threshold set at 620,000 yen (approximately 5.92 million won), higher than South Korea's.
Minister of Health and Welfare Jeong Eun-kyeong stated, "We aim to create an environment where seniors can prepare for their own retirement without worrying about reductions in their old-age pensions. We will continue to refine and enhance the National Pension system to ensure it serves as a reliable support for a stable retirement."
The refund process will be automatic, requiring no separate application from beneficiaries. The National Pension Service will begin processing refunds sequentially starting at the end of July, once it receives confirmed tax data from the National Tax Service. Beneficiaries can also choose to submit their tax documents directly to the service for refunds. Additionally, those previously excluded from reductions will automatically receive the 2025 dependent family pension amounts (20,520 won for spouses, 16,680 won for parents and children) as part of the refund.
For income earned in 2026, the ministry proactively applied the new threshold starting in January to avoid administrative complications associated with 'pre-reduction and post-refund' processes. Currently, if a beneficiary reports income below 5.19 million won for 2026, any reductions have already been halted. This system allows for a two-step process: first, halting reductions based on reported income, and second, adjusting based on confirmed tax data from the National Tax Service.
The Ministry of Health and Welfare estimates that about 100,000 beneficiaries, representing approximately 65% of those previously subject to reductions, will be able to receive their full National Pension benefits due to these changes. As of May 2026, 90,000 individuals (66.4% of those affected) received an additional 19.5 billion won in pension payments due to the pre-reduction halt, averaging about 50,000 won per person. The number of beneficiaries eligible for refunds for 2025 income is also estimated at around 100,000 (66.3%), with a total refund amounting to 44.5 billion won (approximately 600,000 won per person for 12 months).
The impact of the relaxed criteria on the overall financial health of the National Pension Fund is expected to be minimal. Although the number of beneficiaries affected by the elimination of the first two income tiers accounts for 65% of the total, the amount previously deducted from them represents only 15% of the total 279.1 billion won.
Among OECD member countries, South Korea, Japan, and Spain are the only nations that reduce pensions based on income activities, with Japan's threshold set at 620,000 yen (approximately 5.92 million won), higher than South Korea's.
Minister of Health and Welfare Jeong Eun-kyeong stated, "We aim to create an environment where seniors can prepare for their own retirement without worrying about reductions in their old-age pensions. We will continue to refine and enhance the National Pension system to ensure it serves as a reliable support for a stable retirement."
* This article has been translated by AI.
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