🚨 Slow Step

Today Korean Social News for Beginners | 2025.12.05

0️⃣ National Pension Premium Gradual Increase and Generational Equity Debate

📌 New Year National Pension Premium 'Slow Step' Increase… Quietly Growing Burden

💬 Starting January 2026, the National Pension contribution rate will increase from 9% to 9.5%. According to the National Pension parametric reform plan passed by the National Assembly this year, the contribution rate will gradually rise by 0.5 percentage points each year until 2033, finally reaching 13%. Workers earning 3 million won per month will need to pay an additional 7,500 won monthly, while regional subscribers will pay an extra 15,000 won. This is the first increase in 28 years since 1998. At the same time, the income replacement rate has been adjusted to 43%, increasing pension benefits. However, if income continues to decrease due to economic downturn, some subscribers may face a heavier burden. The government explains that the pension fund's sustainability period will extend from 2056 to 2071, but measures to ease the real burden on young people and self-employed workers remain a challenge.

💡 Summary

• Slow Step is a method of gradually increasing the contribution rate to secure financial stability and generational equity.
• Starting in 2026, it will rise by 0.5 percentage points annually, reaching 13% by 2033, increasing the burden for both workplace and regional subscribers.
• While the income replacement rate increase will raise benefit amounts, additional measures are needed to ease the burden on low-income earners and self-employed workers.

1️⃣ Definition

Slow Step means a method of gradually increasing or decreasing rates step by step rather than all at once when reforming social security systems or public utility fees, to ease the burden on citizens. It is a gradual adjustment strategy to reduce social backlash from sudden system changes and secure system stability.

In the National Pension system, Slow Step aims to delay financial depletion and secure generational equity by raising the contribution rate by a certain percentage each year. Starting at 9.5% in 2026 and reaching 13% by 2033 with annual increases of 0.5 percentage points, it is designed so subscribers don't feel a sudden burden increase.

💡 Why is this important?

• It delays the National Pension financial depletion and secures system sustainability.
• It has higher social acceptance than raising rates significantly all at once.
• It can increase equity by distributing the burden across generations.
• Complementary measures are needed as the real burden on low-income earners and young people may increase.

2️⃣ Background and Impact of National Pension Premium Increase

📕 Background of Contribution Rate Increase

• National Pension financial depletion is expected. Main background includes:

  • Due to low birth rates and aging, the number of pension recipients is increasing while contributors are decreasing.
  • According to the 2024 financial projection, if the current system continues, the pension fund will be depleted by 2056.
  • The 9% contribution rate has been frozen for 26 years since it was increased once in 1998 after the system's introduction in 1988.
  • The number of pension recipients continues to increase, but the low contribution rate is worsening financial imbalance.

• Generational equity issues have been raised. Main points include:

  • The current elderly generation pays low premiums but receives high pensions, while future generations may pay high premiums but receive low pensions.
  • Young people have high distrust that they won't receive adequate pensions for the premiums they pay.
  • The intention is to reduce the burden on future generations and increase generational equity through premium increases.
  • However, there is also opposition to the increased premium burden on the current generation.

📕 Specific Details of the 2026 Increase

• The contribution rate increases from 9% to 9.5%, a 0.5 percentage point rise. Main details include:

  • Workplace subscribers will see their share and their company's share each increase from 4.5% to 4.75%.
  • Regional subscribers pay the full amount themselves, so it increases from 9% to 9.5%.
  • For a worker earning 3 million won monthly, the personal contribution increases from 135,000 won to 142,500 won, an increase of 7,500 won.
  • It will increase by 0.5 percentage points annually until 2033, finally reaching 13%.

• The income replacement rate has also been adjusted. Main changes include:

  • The income replacement rate decreased from 50% in 2008 to 41.5% in 2024.
  • Through this reform, it has been raised to 43% and will be maintained without further reduction.
  • This means you will receive more pension in exchange for paying higher premiums.
  • For a 40-year subscriber with average monthly income of 2.86 million won, they will receive 1.23 million won monthly.

📕 Impact and Burden by Subscriber Type

• The burden on workplace subscribers increases. Main impacts include:

  • A worker earning 3 million won monthly will face an additional burden of 7,500 won per month in 2026, totaling 60,000 won per month by 2033.
  • Companies will also bear the same amount, increasing their labor costs.
  • The higher the income, the larger the premium increase, but benefit amounts also increase with the income replacement rate rise.
  • Young people may feel a greater burden as they must pay premiums for a longer period.

• The burden on regional subscribers and self-employed workers is greater. Main issues include:

  • Regional subscribers bear the full premium themselves, twice the burden of workplace subscribers.
  • Self-employed workers with irregular income may find it difficult to pay premiums during economic downturns.
  • There are concerns that more people may apply for payment exemptions or fall into arrears due to the premium burden.
  • It is pointed out that premium support for low-income regional subscribers needs to be expanded.

💡 Key Issues of Slow Step Increase

1. Financial stability: Fund depletion is delayed from 2056 to 2071 by 15 years, but not a fundamental solution
2. Generational equity: Balance between current generation burden increase vs future generation pension security
3. Real burden: May feel heavier due to economic downturn and income decrease
4. Low-income support: Additional support measures needed for regional subscribers and self-employed workers
5. Structural reform: Parametric reform alone has limits, additional reforms like automatic adjustment mechanisms needed

3️⃣ Government Measures and Future Tasks

✅ Government Burden Relief Measures

• The payment exemption system is being expanded. Main details include:

  • Subscribers who have no income or significantly reduced income due to unemployment or business closure can apply for payment exemption.
  • The exemption period is included in the subscription period but no premiums need to be paid.
  • However, if not paid later, the pension amount for that period will be reduced.
  • During economic downturns, payment exemption requirements can be eased to reduce the burden.

• Premium support for low-income earners is being strengthened. Main support measures include:

  • The Durunuri social insurance premium support project supports part of the premiums for workers at small businesses.
  • Workers with average monthly income below 2.7 million won can receive up to 90% premium support.
  • Low-income regional subscribers receive burden relief through premium reduction systems.
  • Plans to expand support targets and amounts are under review.

✅ Long-term System Improvement Tasks

• Introduction of automatic adjustment mechanisms is being discussed. Main details include:

  • Automatic adjustment mechanisms are systems that automatically adjust contribution rates or benefit amounts according to changes in population structure or economic conditions.
  • Japan, Sweden, and others have already introduced them to manage pension finances stably.
  • Korea is also reviewing introduction plans centered on the Pension Reform Special Committee.
  • However, protection measures for beneficiaries must also be prepared as automatic adjustment may reduce benefits.

• Strengthening the multi-tier pension system is necessary. Main directions include:

  • Since the National Pension alone cannot guarantee retirement, retirement pensions and personal pensions must be activated together.
  • Plans to expand mandatory retirement pension coverage and introduce automatic enrollment are under review.
  • Tax benefits for personal pensions should be increased to encourage voluntary retirement preparation.
  • Expanding the basic pension to guarantee minimum living standards for low-income elderly is also important.

• Intergenerational dialogue and consensus are important. Main tasks include:

  • The younger generation has high distrust of the National Pension and doesn't sympathize with the need for system improvement.
  • The elderly generation already receives low pensions and may oppose additional burdens.
  • Social discussion is needed to achieve intergenerational understanding and consensus.
  • Trust must be built through transparent information disclosure and sufficient communication.

4️⃣ Related Terms Explanation

🔎 National Pension Act

• The National Pension Act is the basic law to guarantee citizens' retirement income.
  • The National Pension Act is a law enacted in 1986 and implemented from 1988 to guarantee stable living by providing pensions when citizens' income decreases or stops due to old age, disability, or death.
  • Main contents of the law include: First, all citizens aged 18 to 60 with income must join mandatorily. Second, those who pay premiums for 10 years or more can receive old-age pension from age 65. Third, disability pension and survivors' pension are also provided in case of disability or death. Fourth, the contribution rate and income replacement rate are set by law and changed through National Assembly resolution.
  • The 2024 amendment passed by the National Assembly includes raising the contribution rate by 0.5 percentage points annually from 2026 to 13% by 2033, and adjusting and fixing the income replacement rate at 43%. This is the first contribution rate increase in 26 years since 1998, a measure to increase financial stability and generational equity.

🔎 Parametric Reform

• Parametric reform is a method of adjusting operating numbers while maintaining the system framework.
  • Parametric reform refers to a reform method that adjusts core numbers (parameters) of system operation such as contribution rate, income replacement rate, and benefit start age while keeping the basic structure of the pension system intact. Compared to structural reform, it has the advantage of easier social consensus and less political burden.
  • This National Pension reform is a representative parametric reform case. First, it gradually raises the contribution rate from 9% to 13%. Second, it adjusts and fixes the income replacement rate at 43%. Third, it maintains the current benefit start age of 65. Fourth, it doesn't change the basic benefit formula and eligibility criteria.
  • However, parametric reform alone has limits in completely solving long-term financial problems. If low birth rates and aging continue, it can delay financial depletion but cannot fundamentally solve it. Therefore, experts point out that structural reforms like introducing automatic adjustment mechanisms should be pursued alongside parametric reform.

🔎 Automatic Adjustment Mechanism

• An automatic adjustment mechanism is a system that automatically adjusts pensions according to changing circumstances.
  • An automatic adjustment mechanism is a system that automatically adjusts contribution rates or benefit levels according to predetermined formulas based on population structure changes, life expectancy increases, and economic conditions. It has the advantage of securing financial stability without political debate.
  • International examples include: First, Japan uses a 'macroeconomic slide' method to automatically reduce pension amount increase rates by the population decrease rate. Second, Sweden operates a balance mechanism that automatically adjusts pension amounts according to the asset-to-liability ratio. Third, Germany sets an upper limit on contribution rates and a lower limit on pension levels, automatically adjusting within that range.
  • Korea is also discussing introduction plans centered on the Pension Reform Special Committee. Advantages include stable financial management without political influence and increased generational equity. Disadvantages include potential hardship for beneficiaries if benefits are reduced through automatic adjustment, and the need for public understanding and acceptance. When introduced, minimum guarantee levels should be set and low-income protection measures prepared together.

🔎 Income Replacement Rate

• The income replacement rate is the ratio of pension amount to pre-retirement income.
  • The income replacement rate is an indicator showing the ratio of pension benefit amount to average income during the National Pension subscription period. It is an important figure showing how much the pension maintains pre-retirement living standards.
  • The changes in Korea's income replacement rate are as follows: First, it started at 70% when the system was introduced in 1988. Second, it was reduced to 60% in 1998 for financial stability. Third, through 2007 reform, it was designed to decrease from 50% in 2008 by 0.5 percentage points annually to reach 40% by 2028. Fourth, it was 41.5% as of 2024, but through this reform it was raised to 43% and fixed without further reduction.
  • The 43% income replacement rate is based on 40-year subscription. For example, a subscriber with average monthly income of 2.86 million won who pays premiums for 40 years will receive a monthly old-age pension of 1.23 million won (2.86 million won × 43%). It decreases proportionally for shorter subscription periods. The OECD average income replacement rate is about 50%, so Korea is relatively low, and adequate retirement security with only the National Pension is difficult, requiring preparation of retirement pensions and personal pensions together.

🔎 Payment Exemption System

• The payment exemption system exempts premium payment during financial difficulties.
  • The payment exemption system is a system where National Pension subscribers can be exempted from paying premiums for a certain period when they have no income or significantly reduced income due to unemployment, business closure, leave of absence, etc. It is included in the subscription period but no premiums need to be paid, reducing the financial burden.
  • Payment exemption applicants include: First, unemployed persons or self-employed who closed their business. Second, those having difficulty with income activities due to illness or injury. Third, those on military service or continuing studies. Fourth, those who stopped income activities due to childbirth or childcare. Applications can be made at National Pension Service branches or online, requiring submission of documents proving income decrease.
  • Pension calculation during payment exemption period is as follows: The exemption period is included in the subscription period, but income for that period is calculated as '0', lowering average monthly income and reducing pension amount. For example, if you receive exemption for 5 years out of 40 years subscription, only 35 years are recognized as income. If financial circumstances improve later, premiums for the exemption period can be paid retroactively, and if paid, that period's income is also reflected in pension amount calculation.

5️⃣ Frequently Asked Questions (FAQ)

Q: How much will my National Pension premium increase exactly from 2026?

A: For a workplace worker earning 3 million won monthly, it increases by 7,500 won; for regional subscribers, 15,000 won.

• Since the 2026 contribution rate increases from 9% to 9.5%, a 0.5 percentage point rise, the burden increase varies by income. For workplace subscribers, since the person and company share half each, if monthly salary is 3 million won, personal premium increases from 135,000 won (3 million won × 4.5%) to 142,500 won (3 million won × 4.75%), an increase of 7,500 won. For a 5 million won salary, it increases by 12,500 won monthly.
• Regional subscribers bear the full amount themselves, so the increase is larger. A regional subscriber with monthly income of 3 million won increases from 270,000 won (3 million won × 9%) to 285,000 won (3 million won × 9.5%), an increase of 15,000 won. Since it increases by 0.5 percentage points annually until 2033, ultimately based on 3 million won monthly salary, workplace subscribers face an additional burden of 60,000 won monthly, and regional subscribers 120,000 won monthly.

Q: Will I receive more pension later as premiums increase?

A: The income replacement rate is raised to 43%, so pension amounts also increase, but it varies by subscription period and income.

• Through this reform, the income replacement rate rises from 41.5% to 43% and is fixed without further reduction, so future beneficiaries will receive more pension. Based on 40-year subscribers, if average monthly income is 2.86 million won, under the current system they receive 1.18 million won monthly (2.86 million won × 41.5%), but after revision they will receive 1.23 million won monthly (2.86 million won × 43%), an increase of about 50,000 won.
• However, pension amounts vary by individual depending on subscription period and average monthly income. If the subscription period is short or average income is low, the pension amount is also small. Also, while the younger generation paying more premiums longer will receive relatively more benefits, considering inflation and real purchasing power changes, the perceived benefits may differ. You can check expected pension amounts using the 'Check My Pension' service on the National Pension Service website.

Q: What support can I receive if the premium burden is too great?

A: You can use the payment exemption system, Durunuri support, and premium reduction systems.

• If you have no income or significantly reduced income due to unemployment or business closure, you can apply for payment exemption. It is included in the subscription period but no premiums need to be paid, reducing the immediate burden. If you have financial room later, you can pay retroactively to increase pension amounts. You can apply by visiting National Pension Service branches or online.
• If you work at a small business (fewer than 10 employees) with average monthly income below 2.7 million won, you can receive up to 90% premium support through the Durunuri social insurance premium support project. Low-income regional subscribers can reduce their burden through premium reduction systems, and basic livelihood security recipients receive full National Pension premium support. For details, contact the National Pension Service (☎1355) or visit a nearby branch for consultation.

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