All seniors get welfare from 2014

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All seniors get welfare from 2014

The incoming government of Park Geun-hye will expand welfare benefits for all seniors over 65 starting from July 2014.

Fulfilling an election campaign pledge, all seniors will receive monthly benefits of between 40,000 won ($37) and 200,000 won based on income, the presidential transition team said yesterday.

The team said seniors in the bottom 70 percent of income earners will be eligible for payments of between 140,000 won and 200,000 won if they are also enrolled in the National Pension Service, the Korean equivalent of the U.S. Social Security System.

Seniors below the 70th percentile who are not in the pension service will receive the full 200,000 won.

People in the top 30 percent of income will receive between 40,000 and 100,000 won if they are not enrolled in the National Pension Service and 40,000 won if they are.

Currently, affluent seniors do not receive any old-age welfare benefits. Seniors below the 70th percentile in income receive around 95,000 won monthly, an amount many analysts say is insufficient.

During her election campaign Park pledged to extend the basic old-age benefit to all seniors regardless of income bracket and double the payment received to 200,000.

The transition team originally intended to make the subsidies available starting from next January but said it had to postpone the plan because of budget considerations and the need to pass the measure in the National Assembly.

More than seven million seniors are expected to be eligible for the payments by 2017.

Financing the program through 2017 is expected to cost over 40 trillion won. The transition team has currently allocated 30 trillion won for the payments.

The transition team last month proposed to fund the new payments partially through National Pension Service funds but backpedaled after a public backlash, especially from the younger generation.

In that plan, 30 percent of funds for the senior subsidies would have come from the National Pension Service.

The National Pension Service, with assets of 391 trillion won, is paid into by salaried workers and helps fund their retirements after the age of 61, while the basic old-age subsidy is paid from government funds.

With the aging of Korean society, the National Pension Service is expected to be depleted within the next 50 years, leaving the younger generation concerned about their retirement plans.

“By principle, the financing of the basic old-age subsidy will come from national and district government funds,” said Choi Sung-jae, Park’s employment and welfare senior secretary.

But some backlash is expected from National Pension Service subscribers regarding the differences in payments between them and people not in the system.

Some people reaching retirement age are opting to bail out of the National Pension Service, for which they pay monthly premiums, saying that the new senior subsidy plan pays more.

The Korea Development Institute released a study yesterday, saying that old-age welfare payments should take into consideration the economic standing of the seniors and especially whether they live with their children or are financially independent. Otherwise, support may be given to those who don’t need it, the KDI said.

In a 2011 study on public pension plans and seniors in poverty, the KDI found that the poverty rate was 70.9 percent for independent senior households without a working person between 18-64 years old compared to 18.7 percent for seniors living with their children and family.

But seniors living independently from their children earned an average annual income of 1.15 million won individually and 4.49 million combined with their spouse. Meanwhile, seniors living with their children earned an average annual income of 620,000 won, which is considerably less, but they were also being supported by their families.

The presidential transition team also announced it would increase senior employment opportunities by 50,000 jobs per year.

By Sarah Kim []

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