Is it okay if I’m ‘late’ getting my National Insurance?


“I’m retired, but I don’t receive a state pension, and I’m afraid I’ll have a gap in my income.”

This is what an employee who is preparing to retire said. Since 2013, the age to start receiving the national pension has been delayed by one year every five years. Starting in 2033, the age of eligibility will be 65. This change has led to an “income gap” in which people retire and do not receive a pension.

The Korea Development Institute (KDI) analyzed in a report titled “How to Respond to the Longer Pension Gap” that “raising the starting age for receiving national pension can improve the sustainability of national pension finances,” but that “insufficient income supplementation during the pension gap can increase the poverty rate and reduce the quality of life of the elderly.

▷ Pension gaps are getting longer

Last year, the Organization for Economic Cooperation and Development (OECD) recommended raising the age of eligibility for national pensions from 65 to 67 after 2035. This is because the age of the population is aging and the time to exhaust the national pension is increasing. However, the legal minimum retirement age has been fixed at 60 since 2016. The actual retirement age is lower, averaging in the early to mid-50s. This is why there are concerns that the pension gap could get longer and longer.

The story is similar in other countries. As of 2020, the OECD average pension age was 64.2 years old, which is higher than in Korea. Denmark is raising its pension age from 68 to 74 from 2030 to 2060 to reflect life expectancy. France has passed reforms to delay the start of pensions by increasing the retirement age and the number of years of contributions.

▷ Long gaps in poverty are unsettling

This raises the prospect that pension gaps could increase poverty rates. Indeed, in the UK, raising the state pension age from 65 to 66 increased the poverty rate by 14 percentage points (p)스포츠토토. In Australia, low-income earners tended to rely on social welfare programs such as unemployment benefits during the pension gap.

In Korea, under the pension reform, those born after 1969 can receive the national pension at age 65 without any reduction. The government is concerned about their poverty rate.

▷ Earned income is still good

The KDI analyzed the household income and consumption expenditure at age 61 of household heads born in 1957 and 1956 through the Household Financial Welfare Survey. The analysis takes into account that the pension age was raised from 61 to 62 starting in 1957.

The results showed that the pension income of those born in 1957 decreased by 2.23 million won compared to those born in 1956. However, earned income increased by 5.13 million won. The earned income made up for the pension gap. The annual decrease in consumption expenditure was 190,000 won, but the analysis did not find it significant. The KDI explained that pensioners responded to the gap by increasing their earned income.

▷ Still, the pension gap is daunting

However, it is argued that the results could be different if a wider range of pensioners were analyzed. For example, if a family member becomes ill, medical expenses may increase, making it harder to fill the gap.

In light of this, the KDI suggests two main policy changes. First, it suggests that reemployment support services should be improved to encourage middle-aged and older people to extend their employment. It also emphasizes that the introduction of a partial pension system should be considered to reduce anxiety about pension gaps. A partial pension system is a system that allows people to receive part of their basic pension early. Germany and Finland are among the countries that have introduced such programs.

“It can be used to supplement the lack of labor income when older workers gradually reduce their working hours until retirement or move to a bridging job,” the KDI said. “It is necessary to encourage gradual retirement systems linked to partial pension systems to support long-term work.”

▷ Don’t just wait for the system to improve.

The experts emphasized that individuals should also prepare for the pension gap. One example is the “early old-age pension”. It allows you to receive your benefits up to five years earlier. However, there is a catch. Your income must be lower than the average monthly income of national pensioners. It’s also worth noting that the basic pension amount is reduced by 6 percentage points for every year you delay the start of your old-age pension. Another option is to utilize a housing pension, but you’ll need to check the market value of your home and the age threshold.

Experts also advise that you should start saving for a private pension. This includes pension savings and IRPs (individual retirement plans), as well as pension asset allocation, which involves investing in bonds and bond funds, dividend-paying funds and ETFs (exchange-traded funds), and REITs (real estate indirect investment vehicles) that can be invested directly from the pension fund.

“Consideration should be given to utilizing a mandatory pension savings system, whereby a certain amount of money is automatically transferred to the pension account on a regular basis,” says the Mirae Asset Investment and Pension Center.

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