Struggling Youth Demographic. (Image courtesy of Yonhap)
SEOUL, July 12 (Korea Bizwire) — South Korea’s young population is facing a looming retirement crisis due to alarmingly low enrollment in the national pension system, according to a new report from the National Pension Research Institute, released Friday.
The report, titled “Strategies to Expand National Pension Coverage for Young Adults,” highlights a combination of late entry into the labor market, unstable employment, and ineffective existing support policies as key factors pushing many young people into a pension blind spot.
As of the end of 2023, only 24.3% of individuals aged 18 to 24 were enrolled in the National Pension Service (NPS) — a figure the report attributes to delays caused by university attendance, military service, and prolonged job searches. The rate rises to 57.9% among those aged 25 to 29, but still lags far behind the OECD average.
The broader structural issue, according to the report, lies in Korea’s low youth labor force participation rate (49.4%) and employment rate, both significantly below OECD standards (60.5% and 42.8%, respectively). This environment, the report notes, structurally inhibits pension contributions.
The financial consequences are stark. A person who enters the workforce five years late and experiences 10 years of unemployment would receive 30.3% less in pension benefits than a worker with a standard contribution record — one of the steepest declines among OECD countries.
National Pension Gaps Leave Korean Young Adults at Risk, Report Warns (Image supported by ChatGPT)
Current credit systems for military service, childbirth, and unemployment are deemed insufficient. For instance, military service credit only covers six months, despite actual service lasting much longer. Meanwhile, childbirth credits apply only from the second child onward, a mismatch with Korea’s low birthrate reality.
To address this, the report urges bold policy reforms aimed at boosting early and consistent pension enrollment among youth. Recommendations include:
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Expanding military service credit to cover the full duration of service.
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Applying childbirth credits from the first child, and counting the child’s birth date as the start of pension eligibility.
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Lowering the mandatory pension enrollment age from 18 to 15 for working teens.
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Introducing a “minimum contribution recognition” system that boosts the value of early contributions made by low-income young workers for the first 12 to 18 months of employment.
The report concludes by calling for a comprehensive overhaul of the pension system to support young people’s financial futures and prevent lifelong retirement insecurity. “We must break the cycle in which limited pension participation in youth leads to a precarious old age,” it states.
M. H. Lee (mhlee@koreabizwire.com)
