Early Pension Claims Hit All-Time High, Exposing Cracks in Korea’s Retirement System (Image supported by ChatGPT)
SEOUL, May 13 (Korea Bizwire) — A record number of South Koreans are choosing to receive their national pension benefits early—despite steep long-term financial penalties—as rising economic pressure and delayed retirement payouts drive more people to bridge income gaps in their post-retirement years.
According to data released by the National Pension Service on Monday, early recipients of the national pension surpassed 948,000 as of the end of 2024, an increase of nearly 100,000 from the previous year. This marks the highest level since the early pension scheme was introduced in 1999.
Under the current system, South Koreans can begin drawing pension benefits up to five years before the standard eligibility age of 63. However, for each year the pension is received early, the annual payout is reduced by 6 percent—leading to a maximum permanent reduction of 30 percent. For example, a monthly pension originally worth 1 million won would be reduced to 700,000 won if claimed five years early.
This permanent reduction, often dubbed the “penalty pension,” applies for life, regardless of how long the recipient lives.
Experts attribute the surge in early pension claims in part to the government’s decision to raise the official pension eligibility age from 62 to 63 in 2025. When similar changes were implemented in 2013 and 2018, early pension claims rose by 7.5% and 18.7% respectively, as many nearing retirement age found it difficult to wait for delayed payments.
Another key factor is South Korea’s structural income gap between the legal retirement age of 60 and the pension eligibility age. With three years of no formal income in between, many retirees are turning to early pension withdrawals as a stopgap measure.
Additionally, more individuals are choosing lump-sum payouts through the “refund lump-sum payment” system, forfeiting potentially higher long-term benefits for immediate cash. According to the National Pension Research Institute, the number of refund recipients rose to 196,000 in 2024—up over 20,000 from the previous year—with total payouts surging over ₩1.26 trillion, a 10% increase year-on-year.
The trend reflects growing financial insecurity among Korea’s aging population and raises concerns about long-term sustainability and adequacy of pension support in a rapidly aging society.
M. H. Lee (mhlee@koreabizwire.com)
