The rapid pace of the demographic transition, marked by accelerating population aging and rising old-age dependency ratios, has sparked serious concerns about the fiscal sustainability and future viability of existing pension frameworks. (ADB, 2024) Similarly, pension reforms across Asia and the Pacific demonstrate convergent strategies to address aging populations and fiscal pressures. (ISSA, 2025) This article focuses on the East Asian countries China, Japan, the Republic of Korea and Mongolia, exploring tailored approaches to these challenges. It highlights how regional reforms adapt to unique demographic and economic realities.

Pensioners walk along a street in Ronda, Spain, March 30, 2023. REUTERS/Jon Nazca Purchase Licensing Rights

Two key demographic indicators illustrate the scale of this challenge. First, the proportion of the population aged 65 and above shows a dramatic upward trend across East Asian countries. These percentages are projected to increase significantly by 2060, with the Republic of Korea potentially reaching 43.7 per cent, and Japan 37.4 per cent [Figure 1].

Second, the old-age dependency ratio, which measures the number of elderly people as a proportion of the working-age population, reveals an equally concerning trend.  These ratios are expected to more than double by 2060 in most countries, with the Republic of Korea projected to reach 95.4 per cent, and Japan 78.7 per cent [Figure 2]. According to these two figures, the Republic of Korea is facing the greatest demographic challenge in the region.

These demographic shifts have prompted East Asian countries to implement wide-ranging policy reforms, particularly in their pension systems. China, Japan, the Republic of Korea and Mongolia have each developed distinct approaches while sharing common strategic elements in addressing demographic challenges.

The analysis reveals several key reform patterns across the region. China has introduced a differentiated retirement age system and launched a third-pillar private pension framework. Japan has expanded social insurance coverage and implemented a macroeconomic indexation mechanism for pension benefits. The Republic of Korea has raised contribution and income replacement rates. Mongolia has undertaken a fundamental restructuring through its new General Law on Social Insurance. (Social Security Administration, 2022a, 2022b and 2024; Ministry of Health and Welfare, 2025)

Despite their diverse economic and political contexts, these countries share three primary reform objectives: adapting pension systems to aging populations, ensuring adequate retirement income, and expanding coverage to underserved groups. The subsequent sections provide a detailed analysis of specific reforms in each country, examining their implementation strategies and evaluating their effectiveness in addressing these shared challenges.

China

China has undertaken extensive structural reforms to its pension system in response to accelerating demographic changes and systemic fragmentation within its existing framework. In September 2024, the Standing Committee of the 14th National People's Congress enacted significant modifications to the Basic Pension Insurance (BPI) programme, introducing a differentiated approach to retirement age adjustments. (Social Security Administration, 2024)

The reform establishes a gradual increase in retirement ages over 15 years, with men's retirement age increasing from 60 to 63 years, women in white-collar positions from 55 to 58 years, and women in blue-collar positions from 50 to 55 years. The implementation schedule incorporates incremental increases of one month per five months for men and women in white-collar positions, while women in blue-collar positions follow an accelerated progression of one month per three months.

The reform framework also introduces flexibility through early retirement provisions, allowing retirement up to three years before the normal retirement age, and deferred retirement options extending up to three years beyond the normal retirement age.

In a parallel development, China launched a comprehensive and voluntary third-pillar state pension programme (a defined contribution framework run by commercial banks and asset management companies) in November 2022 to complement the existing dual-pillar structure. This initiative aims to enhance voluntary retirement savings through tax-advantaged personal pension mechanisms. (Social Security Administration, 2022a)

The third-pillar enhancement includes regulated withdrawal protocols aligned with retirement age parameters, comprehensive beneficiary designation mechanisms, and dual regulatory oversight by banking and securities commissions.

Japan

Japan has undertaken reforms to address the challenges of its rapidly aging society and secure its pension system's long-term sustainability. A notable update to social insurance coverage took effect on 1 October 2024, refining the scope of mandatory enrollment for part-time workers. Previously, all full-time employees and part-time workers working at least 75 per cent of full-time equivalent (FTE) hours – typically 30 hours per week based on a 40-hour full-time schedule – were already required to be enrolled in social insurance programmes, including health and pension insurance, at firms with five or more employees. The recent reform expands coverage for part-time workers working between 20 hours per week and 75 per cent FTE. Now, firms with 50 or more employees must enroll these part-time workers in social insurance, a shift from the prior threshold of 100 or more employees set in October 2022. (Social Security Association, 2022b)

In parallel with this coverage expansion, Japan has systematically increased the pension eligibility age from 60 to 65 years. The earnings-related component of this transition is scheduled for completion by 2025 for men and 2030 for women, reflecting a gradual approach to pension system reform. The country has also maintained its macroeconomic indexation mechanism, introduced in 2004, which implements automatic adjustments to pension benefits based on demographic and economic indicators, specifically changes in the number of contributors and life expectancy trends. (OECD, 2021)

To further enhance pension system sustainability, Japan has introduced innovative measures promoting extended workforce participation beyond age 65. These initiatives include incentive structures allowing workers to defer pension receipt until (at maximum) the age of 75, accompanied by increased benefit levels. (ISSA, 2024a)

Republic of Korea

The Republic of Korea has enacted significant pension reforms to address its rapidly aging population and ensure the sustainability of its national pension system through a partial revision of the National Pension Act, passed by the National Assembly on 20 March 2025, and coming into effect on 1 January 2026. This landmark legislation, 18 years after the 2007 reform (ISSA, 2024b), raises the insurance contribution rate from 9 per cent to 13 per cent (split evenly between employees and employers at 6.5 per cent each by 2033, increasing by 0.5 per cent  annually from 2026) and adjusts the nominal income replacement rate to 43 per cent  starting in 2026, halting the previously scheduled decline to 40 per cent by 2028. (Ministry of Health and Welfare, 2025)

The reform aims to extend the National Pension Fund’s viability, previously projected to be depleted by 2056. Combined with efforts to increase the fund’s rate of return from 4.5 per cent to 5.5%, the depletion date is expected to shift to 2071. The legislation also strengthens public trust by explicitly guaranteeing pension payments in law. It introduces expanded credits, such as a 12-month childbirth credit for the first child (removing the prior 50-month cap) and an increase in military service credit from 6 to 12 months. Additionally, it broadens insurance contribution support for low-income regional subscribers to mitigate the burden of higher rates. (Ministry of Health and Welfare, 2025)

These changes reflect an approach to balancing fiscal sustainability with improved retirement income security, addressing long-standing political challenges and fostering intergenerational solidarity.

Mongolia

Mongolia has enacted substantial reforms to modernize and strengthen its pension framework, through the General Law on Social Insurance (GLSI) passed by the Mongolian Parliament on July 7, 2023. This comprehensive legislation, which took effect on 1 January 2024, supersedes the 1994 Law on Social Insurance and introduces fundamental changes to enhance the efficiency and sustainability of the nation's social insurance system. (Ministry of Family, Labour and Social Protection, 2024)

The General Law prescribes the implementation of an ICT-based system, incorporating measures to minimize future insurance fund losses while initiating effective pension insurance fund collection mechanisms. The legislation introduces new requirements for pension recipients, mandating that they maintain social insurance contributions – excluding unemployment insurance – when working under employment agreements, work-for-hire agreements or similar arrangements. For employees under dual employment, contributions from secondary employment are limited to pension and health insurance only. (PwC, 2023)

In alignment with contemporary pension system design principles, Mongolia introduced a notional defined contribution (NDC) system in 2018 for workforce newcomers, representing a strategic shift toward enhanced system sustainability. The nation has also embarked on a gradual increase in retirement ages, with a planned progression to age 65 by 2042 for men and 2067 for women, demonstrating a measured approach to demographic adaptation which differs from other countries. (ISSA, 2024c)

Analysis

The recent pension reforms across East Asian countries reveal distinct approaches to addressing similar demographic challenges, with each country implementing tailored solutions with related strategic elements. These reforms demonstrate a regional trend toward increasing retirement ages, expanding coverage and enhancing scheme sustainability. (Chomik, O’Keefe and Piggott, 2024)

China and Japan have adopted particularly comprehensive approaches, with China implementing a differentiated retirement age adjustment system based on gender and occupation type. At the same time, Japan is focusing on broadening social insurance coverage to include smaller employers. Japan and China each offer flexible retirement timing options, with Japan's system allowing for personalized choices while China maintains a structured framework with defined early and delayed retirement pathways.

The Republic of Korea has prioritized fiscal sustainability and income adequacy, with the 2025 National Pension Act amendment significantly raising contribution rates to 13 per cent and fixing the replacement rate at 43 per cent.

Mongolia's reforms stand out for their fundamental restructuring of the social insurance system through the General Law on Social Insurance, combining a notional defined contribution system while maintaining traditional social insurance elements. This mixed approach is different from the incremental modifications seen in other countries.

Common themes across five countries include:

Gradual increases in retirement ages

Enhanced flexibility in retirement timing

Expanded coverage for previously non-covered groups

Introduction of systems for fiscal sustainability

Reforms reflect each country's demographic and economic conditions, with the common goal of ensuring the long-term sustainability of the pension system. The Republic of Korea’s approach blends market-oriented fund management with strong state oversight, while China and Mongolia maintain greater state involvement in their reforms.

These varied approaches to pension reform demonstrate the complexity of addressing demographic challenges while maintaining social protection, with each country adapting international best practices to their unique institutional and cultural contexts.

Final remarks

The analysis of pension reforms in East Asian countries reveals that each country is responding to significant demographic challenges, implementing unique yet similar strategies to ensure the long-term sustainability of their pension systems. (Chomik, O’Keefe and Piggott, 2024) This aligns with broader trends across the Asia-Pacific region, where common strategies are emerging to tackle ageing populations and fiscal pressures.

The reforms demonstrate several key trends and shared characteristics. First, there is a clear movement toward increasing retirement ages and introducing flexibility in retirement timing, as evidenced by the differentiated approach carried out in China, and gradual increases in Mongolia. Second, all countries are expanding coverage to previously underserved populations, with Japan focusing on part-time workers and the Republic of Korea enhancing childbirth and military service credits.

A notable feature of these reforms is the aim to maintain adequate social protection and ensure fiscal sustainability. The third-pillar developments in China, adjustments to the contribution and income replacement rates in the Republic of Korea, reflect this dual objective. In addition, Japan’s macroeconomic indexation mechanism stands out as a particularly unique approach to automatically adjusting benefits based on demographic and economic indicators.

The reforms also reveal a growing recognition of the need for multi-pillar pension systems. 
The third-pillar development in China and the transition toward defined contribution schemes demonstrate this trend. These developments suggest a regional shift toward more diversified and resilient pension frameworks.

As stated in the ISSA Guidelines on Good Governance on responding to the evolving needs of the public and a changing environment (ISSA, 2019), the reforms' effectiveness hinges on several critical factors: managing stakeholder expectations, maintaining political consensus, and developing adaptive governance frameworks that can respond to shifting demographic and economic landscapes.

These reforms position East Asian pension systems to better handle demographic transitions while maintaining social protection (ILO, 2021). The varied approaches taken by each country provide valuable lessons for other regions facing similar demographic challenges, demonstrating the importance of tailoring reforms to specific national contexts while maintaining core principles of sustainability and adequacy.

References

ADB. 2024. Aging well in Asia: Asian development policy report. Manila, Asian Development Bank.

Chomik, R., O’Keefe, P.; Piggott, J. 2024. Pensions in aging Asia and the Pacific: Policy insights and priorities. Manila, Asian Development Bank.

ILO. 2021. World Social Protection Report 2020-22: Social protection at the crossroads – in pursuit of a better future. Geneva, International Labour Office.

ISSA. 2019. “Guideline 25. Responding to the evolving needs of the public and a changing environment”, in ISSA Guidelines on Good Governance. Geneva, International Social Security Association.

ISSA. 2024a. ISSA Country Profile: Japan. Policies as of 1 January 2022. Geneva, International Social Security Association.

ISSA. 2024b. ISSA Country Profile: Korea, Republic of. Policies as of 1 January 2022. Geneva, International Social Security Association.

ISSA. 2024c. ISSA Country Profile: Mongolia. Policies as of 1 January 2022. Geneva, International Social Security Association.

ISSA. 2025. Recent pension reforms in Asia and the Pacific (Analysis). Geneva, International Social Security Association.

Ministry of Family, Labour and Social Protection. 2024. General law on social insurance. Ulaanbaatar City.

Ministry of Health and Welfare. 2025. 보험료율 13%, 소득대체율 43% 등 담은 연금개혁법안 국회 본회의 통과 [Pension reform bill including 13% insurance premium rate, 43% income replacement rate, etc. passed in National Assembly plenary session]. Sejong.

OECD. 2021. Pensions at a glance 2021: OECD and G20 indicators. Paris, Organisation for Economic Co-operation and Development.

PwC. 2023.