“Wealthier households drew NPS benefits earlier”... The surprising twist behind “early claims”

[Financial News] Among households facing an income gap between retirement and the start of public pension payments, those that maintained relatively stable incomes had higher pension receipt rates than vulnerable households whose incomes fell sharply.

According to a report released on the 9th by the Korea Institute for Health and Social Affairs, titled “The Current State of the Income Crevasse Among Middle-Aged and Older Adults and Response Measures,” access to early public pension benefits during the institutional income gap between retirement and pension receipt varied according to households’ economic circumstances.
The report analyzed pension receipt by income level among households going through this institutional gap, using Statistics Korea’s Household Income and Expenditure Survey (2019–2025). It found that 26.5% of households that maintained income at 100% or more of their pre-retirement median income level, or increased it, claimed public pension benefits early. By contrast, the rate was just 18.1% among vulnerable households whose income plunged to less than half their pre-retirement median. In other words, the early pension receipt rate among relatively well-off households was 8.4 percentage points higher than among households whose incomes fell sharply.
The gap was even wider in the actual public pension benefits households received. Households that maintained or increased their incomes received an average of 1,918,000 won a month in public pension benefits, while those whose incomes fell below half that level received just 527,000 won—a difference of more than 3.6 times.
However, these figures do not separately count only the early old-age pension paid to individuals by the National Pension Service (NPS). Because of the way the Household Income and Expenditure Survey is conducted, they combine public pension benefits received by all household members, including the head of household and their spouse. They include not only NPS benefits but also occupational pensions such as the Public Officials Pension, Teachers’ Pension and Military Pension.
Since NPS early old-age pension benefits can be reduced by as much as 30%, it is difficult for an individual to receive more than 1.9 million won. The high benefit amounts among households that maintained their incomes are therefore thought to reflect, in part, households in which both spouses receive pensions or some members receive high occupational pensions.

The reduction structure for the early old-age pension may have contributed to this gap. Benefits are reduced by 6% (0.5% a month) for each year the start of payments is brought forward. Those who claim five years early receive a reduced amount—up to 30% less—for the rest of their lives.
Therefore, to secure a certain level of living expenses even when claiming a pension early, the amount they would otherwise receive must be high enough. This means that people with a stable contribution record—built, for example, by consistently paying premiums over the past 20 to 30 years—are better positioned to absorb the reduction resulting from an early claim.
Indeed, among new early old-age pension recipients, the share of long-term contributors who had been enrolled in the NPS for at least 20 years rose sharply among men, from 47.4% in 2014 to 77.2% in 2024. Among women, it more than doubled over the same period, from 16.2% to 34.7%.
By contrast, low-income people who lose their jobs or see their incomes plunge during the gap after mandatory retirement may struggle to cover their living expenses even if they claim their pensions early.

Some retirees’ efforts to reduce their National Health Insurance premium burden may also have influenced early pension claims.
The annual income threshold for retaining dependent status under National Health Insurance was lowered from 34 million won to 20 million won (about 1.67 million won a month). As a result, those who receive their pensions normally may lose dependent status, be reclassified as locally insured, and have to pay health insurance premiums.
The analysis suggests that some retirees may strategically apply for their pensions early, accepting lower benefits in order to retain dependent status and avoid health insurance premiums.
By contrast, some people in vulnerable groups are avoiding normal pension enrollment and receipt because of a policy contradiction: receiving more from the NPS can reduce the Basic Pension or result in a full deduction from livelihood benefits under the National Basic Livelihood Security System (NBLSS). This has created the opposite distortion.
The report criticized the unequal distribution across socioeconomic groups of the financial resources and means of coping needed to get through the income gap between mandatory retirement and the start of pension payments.
The report notes that while people with greater financial resources can cover a certain level of living expenses even when claiming their pensions early, vulnerable groups suffer severe household deficits and still do not receive adequate protection from public pensions.
[email protected] Ahn Ga-eul Reporter