An increasing number of elderly land owners are registering for a type of reverse mortgage that consists of farmland put up as collateral in exchange for monthly pension stipends. (Image: Yonhap)
SEOUL, Jan. 17 (Korea Bizwire) – An increasing number of elderly land owners are registering for a type of reverse mortgage that consists of farmland put up as collateral in exchange for monthly pension stipends.
This form of “agricultural land pension plan” is open to seniors 65-years old and above and who have at least five years of experience as farmers. Should the applicant pass away, the pension payments pass on to the applicant’s spouse or children. Premature termination of the plan requires the applicant to return the total amount received including interest.
According to the Korea Rural Community Corporation, 8,631 have registered for the pension plan since it was introduced in 2011. The average age of the applicants is 73.
After 911 signed up for the new pension plan in 2011, the number of registrations has trended upwards. Although there was a drop from 2012 to 2014, property owning seniors have been increasingly making use of the pension scheme. There were 1,243 registrations in 2015, 1,577 in 2016 and 1,848 in 2017.
These individuals receive anywhere from 100,000 won to 3 million won per month on the strength of property values ranging from 10 million won to 1 billion won. The average valuation of property per applicant is 167 million won, and the average monthly stipend is 916,000 won.
Applicants can opt for a lifetime disbursement policy or a limited-time plan that is designated into 5-year, 10-year or 15-year blocks. Of the plan’s adherents, 60.8 percent are currently registered under the latter scheme, as the limited-time plan offers higher payments.
According to the Korea Rural Community Corporation, 8,631 have registered for the pension plan since it was introduced in 2011. The average age of the applicants is 73. (Image: Yonhap)
A member of the Korea Rural Community Corporation said, “Though life expectancy has risen, many haven’t made the necessary preparations for their golden years, which is why there is growing interest in the agricultural land pension plan. For the fourth straight year, the number of applicants has surged by 10 percent.”
Despite the heightened interest, only 1.77 percent of the 488,000 South Korean land owners 65 years or older are partaking in the pension plan.
A deep-rooted desire to pass on their land to their offspring and the repayment of their stipends should they cancel their plan are believed to be two reasons why the vast majority are choosing to hold on to their property, even though some continue to live in dire need of monthly income.
Kevin Lee (kevinlee@koreabizwire.com)
