The Effect of Contributions Subsidy for Individually Insured Persons on Their Old-age Income Security: Using the Dynamic Microsimulation Model

Abstract

This study examines the long-term effect of contributions subsidy for Individually Insured Persons (hereafter CS) on their old-age income security by using the dynamic microsimulation model. The main results are as follows. First, the study estimated that the CS in National Pension has a negligible impact on insured periods - 0.6 months increase on average - and the take-up rate of the pension benefit - 0.1~0.2%p increase on average-. Second, the effect of CS on monthly pensions is expected to be negligible. Is is expected that the CS will increase the monthly benefit amount by about KRW 1,000. Third, for all old-age pension beneficiaries, the effect of CS is more significant in the middle-income group than in the lower-income group. In the case of CS beneficiaries, the effect is expected to be the biggest in the lowest-income group. Fourth, even if the level of CS, support periods, and percentage of renewing the payment are raised, the additional effect is not expected to be significant. Finally, This study suggests expanding the target of the CS and extending the level of CS and support period.