Fiscal Projections for Elderly Support Programs and Scenario Analysis of the Basic Pension

Published on June 22, 2026
Published by Social Cost Estimates Division


 

   In 2025, the Republic of Korea officially became a super-aged society, and the share of the population aged 65 and over is expected to exceed 40% in 2050. This trend reflects not only an increase in the elderly population but also a longer period spent in old age due to an increase in life expectancy. Meanwhile, the working-age population that supports the elderly is expected to decrease, increasing the old-age dependency burden. These structural changes are likely to lead to growing demand for the government's elderly support policies, and this calls for a thorough review of the financing mechanisms of such policies and the effectiveness of related expenditures.
   However, limitations exist in systematically identifying the overall scope and characteristics of such policies as there is no official definition of what constitutes ’elderly support programs’ at the government level. To address these limitations, this report aims to classify elderly support programs systematically and to provide a comprehensive assessment of their scope and characteristics. More specifically, the analysis covers programs implemented by both the central and local governments, and the report projects fiscal needs over the next 10 years to explore policy implications for future demand. Considering that the basic pension accounts for more than 60% of total fiscal requirements as mandatory expenditure, a separate chapter is devoted to the fiscal projections for this program under different scenarios.
   The report finds that total expenditures by the central and local governments on elderly support programs increased from KRW 15.45 trillion in 2016 to KRW 41.52 trillion in 2025 (i.e., annual average growth of 11.6% over 10 years). Changes are also evident in the composition of spending: programs for income security still account for more than 60% of total spending, while those for elderly care and economic activity support initiatives have expanded at growth rates exceeding the overall average. This indicates a gradual shift in fiscal priorities from cash transfers to service provision and support for social participation.
   The report projects that government expenditure on elderly support programs will exceed KRW 70 trillion by 2035 if current trends continue. In this projection, the design of the basic pension - the largest income security program serving the elderly - emerges as a key determinant of overall fiscal expenditure. Analysis of different policy reform scenarios finds that fiscal implications vary significantly depending on the design of the basic pension. For instance, under Scenario 2, which maintains current benefit levels while expanding eligibility to the bottom 80% of the income distribution, an additional KRW 47.1 trillion in fiscal expenditure is projected over the next 10 years. In contrast, under Scenario 4, which gradually raises the basic pension eligibility age to 68, fiscal savings of KRW 53 trillion are projected over the coming decade.
   The report suggests several recommendations based on the above findings. First, a continuous evaluation of whether fiscal resources are adequately allocated across diverse areas is needed, as demand for elderly care and economic activity support programs is rapidly increasing while income security programs continue to account for the majority of fiscal requirements. In particular, an appropriate balance between cash benefits and services needs to be established. Second, as changes to the design of the basic pension program may result in fiscal requirements that vary by tens of trillions of Korean Won over the next 10 years, a thorough review of key variables, such as benefit levels and eligibility criteria, is required. Third, considering that expenditure related to elderly support programs is projected to exceed KRW 70 trillion in 2035, appropriate financing mechanisms to mitigate the fiscal pressures associated with population aging should be carefully reviewed.