'I can even give my grandchildren allowance money': Korea’s plan to pull 340,000 older adults out of poverty

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'I can even give my grandchildren allowance money': Korea’s plan to pull 340,000 older adults out of poverty

Published: 16 May. 2025, 13:08 Updated: 18 May. 2025, 16:16

Audio report: written by reporters, read by AI

Apartment buildings in Apgujeong-dong, Gangnam District, southern Seoul, are pictured in this photo taken May 7. [YONHAP]

More older Korean adults are unlocking the value of their homes through housing pensions, easing financial strain in retirement as shifting views on inheritance reshape family dynamics, government data showed Thursday.

The central bank and state-run think tanks now propose flexible payouts and inheritance-friendly reforms to help more seniors turn home equity into income in hopes of reducing the nation’s high elderly poverty rate.

Kang, in their 70s, signed up for a housing pension early last year using a 700 million won ($502,000) apartment as collateral. Kang now receives monthly payments in the 2 million won range.

“I used to rely heavily on my children for living expenses,” Kang said. “But now, I can even give my grandchildren allowance money.”

The number of cumulative housing pension subscribers stood at 133,364 as of October 2024, according to the Korea Housing Finance Corporation (HF) on Thursday.

When the system launched in 2007, it attracted just 515 people. But by 2016, the number of new annual subscribers had reached the 10,000 mark, and since 2022, more than 14,000 people have enrolled each year.

The housing pension allows homeowners to take out a reverse mortgage while continuing to live in their home, turning their real estate into a steady income stream.

An HF spokesperson said that 3,101 people had joined the program from January to March of this year, noting a shift in cultural attitudes.

“More children are supporting the idea of their parents boosting their own retirement income rather than inheriting the home,” the spokesperson said.

Job seekers 60 and older view job postings during the 17th Senior Job Fairat Hwaseong Haenggung Square in Paldal District, Suwon, Gyeonggi, on March 28. [NEWS1]

Despite these gains, Korea still faces the highest elderly poverty rate among Organisation for Economic Cooperation and Development countries. In 2022, the rate stood at 39.7 percent. A study released Thursday during a symposium co-hosted by the Bank of Korea (BOK) and the Korea Development Institute argued that housing pensions could offer a path out of poverty for at least 340,000 “house poor” older adults.

The symposium, titled “Poverty, Labor and Policy Directions in a Super-Aging Society,” highlighted that 85.1 percent of older Koreans’ assets are tied up in tangible assets.

That figure dwarfs those of the United States with 57.8 percent, Britain with 76.1 percent and Japan with 37 percent. Yet, only 1.89 percent of eligible households in Korea have signed up for housing pensions.

“Even if someone owns a valuable property, if they can't convert that into living expenses, they still fall below the poverty line statistically,” BOK Gov. Rhee Chang-yong said during the event. “Helping people tap into their existing assets is the right policy direction.”

Research presented at the event showed that if 2.76 million households with expressed interest enrolled in the housing pension plan, the program could generate 34.9 trillion won in annual income.

This would reduce the older adult poverty rate by 3 to 5 percentage points. Because this income would be generated from household assets, it would not require additional government spending.

The research estimated that about 220,000 households — or at least 340,000 individuals — could escape poverty under this model.

Even if retirees spend only half their new income, which amounts to around 17.4 trillion won annually, Korea’s real GDP could rise by 0.5 to 0.7 percent from 2023 levels.

Survey results also point to growing interest. A poll conducted between August and October of last year found that 35.3 percent of 3,820 Koreans aged 55 to 79 who had not enrolled in the program were open to the idea.

An aerial view shows Baeksa Village in Nowon District, northern Seoul, undergoing demolition on May 15, with surrounding apartment complexes in the background. [YONHAP]

Still, significant barriers remain. Because housing pension payouts remain fixed, even if home prices rise, many subscribers back out when the real estate market improves.

The BOK proposed offering subscribers a choice between fixed monthly payouts and payouts adjusted based on property value. Other suggestions included extending the repayment window for heirs from six months to three years and making it easier for children to take out loans to cover repayment.

The BOK also recommended increased promotion, as well as incentives like reductions in health insurance premiums and taxes, to drive up enrollment.

When researchers factored in these enhancements, respondents willing to enroll jumped to 41.4 percent.

“We need to reform the system so that high potential demand for housing pensions translates into actual participation,” said Hwang In-do, head of the monetary and financial research team at the Economic Research Institute under the BOK.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY KIM KYUNG-HEE [[email protected]]