Farmland Pension
Korea Rural Community Corporation

A. Problem Analysis

 1. What was the problem before the implementation of the initiative?
- Republic of Korea's rural population is rapidly aging. - According to UN, a country with proportion from 7% to 14% of people aged over 65 is classified as an ageing society, between 14% and 20% as an aged society, and over 20% as a super-aged society. Republic of Korea's rural population is rapidly aging. According to the agricultural research from Statistics Korea in 2009, 34.2% of people in rural villages are aged over 65 that was 23.6% higher than the entire population aging rate of 10.6%. The data showed that rural population already entered in a super-aged society. Considering the number of ‘soon to be’ aged population, we expect that most of rural areas will be filled with aged farmers in near future. - Furthermore, agricultural productivity was decreased due to aging and agricultural competitiveness was declined owing to open agricultural policy like WTO, FTA. - Elderly farmer’s small-scale farming(0.8ha per household) is very weak in agricultural productivity and 77.5% of elderly farmers earned only 10 thousand dollar or less in sales of agricultural and livestock. Additionally almost of them are out of public assistance like national pension and the increased number of aged farmers in rural area poses a significant concern to the society. * over 65 years old of the rural population : 11.6% in year 1990 → 21.7% in 2000 → 34.2% in year 2009(10.6% of the country) * 45.7% of over 65 years old(594,000 households) in year 2009 : out of pension plan

B. Strategic Approach

 2. What was the solution?
- A public agency specializing in rural farmland in Korea Rural Community Corporation(KRC) proposed the introduction of the farmland pension plan - Ministry of Agriculture, Food and Rural Affairs accepted and planned 1) Korea Rural Community Corporation suggested a supporting living measure for elderly farmer 2)Considering 70% of agricultural land in farmer’s fixed assets, government decided to make the some system using farmland and examined in detail how the proposals can be carried out through policy making meetings, expert advisory conferences, a reserch and study. 3) “Farmland pension” is the world’s first pension plan using over 65 years old farmers owned farmland as collateral to get paid monthly installments for the rest of farmer’s life and repaying a mortgage is only due when both farmlandowners pass away. Farmland pension allows seniors to access the land equity without income or credit qualifications. - While receiving a pension, subscribers cultivate or lease farmland. If subscribers pass away, the spouse can continue to receive a pension. When the collateral is disposed, government do not claim any deficiency of amount of repayment because pension debt secured amount of farmland value limited. Also dispositon of remaining balance is returned to the heirs 4) In fact, the result of the initiative showed that farmland pension covered 51% of average expenditure

 3. How did the initiative solve the problem and improve people’s lives?
- Like America's HECM mortgage, the home mortgage system exists around the world, but there is no mortgage system of farmland. Especially, this plan is very suitable for the country in a high proportion(70%) of agricultural land held by low income farmers. - Because insufficient welfare system to support for elderly farmers in Korea, the increased number of aged farmers in rural area poses a significant concern to the society. In order to solve this problem, government's vast resources are needed. But without government’s additional financial burden, government could make monthly annuity payment by using farmland owned as collateral. That is why it is a creative and innovative system.

C. Execution and Implementation

 4. In which ways is the initiative creative and innovative?
- Since this plan is the world’s first pension plan, there were no precedents about operation methods, demanding forecasting. we are concerned about how to executing and implementing. - If Financial institutions is operating farmland pension plan, they could concern the risks about rising interest rates, life expectancy, and the longevity of the contractor until the loan is paid by contractor . Therefore they were reluctant to handle the plan - Utilizing Farmland management fund(one of government funds) to be determined to finance the pension plan by form of borrowing, professional farmland management public organizations, Korea Rural Community Corporation(KRC) to implement projects - The implementation of the strategy to expand into three stages 1) Stage 1 : Analysing of Environment (year 2006 ~2008) Prior to full-scale review of the farmland pension, reviewed all of reasons to start the plan. Finally concluded the plan was very necessary to establish for elderly farmers. At this stage, expert consultation was held several times and organized Project Task Force team in KRC that studied various matters such as demand forecasting and methods of implementation. 2) Stage 2 : Review of introduction (year 2009 ~2010) Prior to project implementation, preceded pension model design, funding and revised law of Korea Rural Community Corporation and Farmland Management Fund 3) stage 2 : Implementation of project(year 2011 ~2013) As well as performed in the the world's first farmland pension plan, curtailed subscription costs necessary to make contract and property tax for subscribers to give more benefits. In addition, evaluated the adequacy and reliability of business operations and farmland pension model also monitoring consecutively.

 5. Who implemented the initiative and what is the size of the population affected by this initiative?
1) Elderly farmer : Getting an annuity as much as possible within Collateral value of agricultural land and desiring a debt to a minimum 2) Government: Due to the nature of the long-term plan, designed the pension model in view of the conservatism to prevent financial loss in consideration of lower interest rates, declining collateral values, longer living than expected 3) KRC: In the position of the agent of government and helper for elderly farmers
 6. How was the strategy implemented and what resources were mobilized?
- "Farmland Management Fund” for pension plan created a stable funding available so that subscribers to be given the incentives to join (Farmland Management Fund is for adequacy of scale, aggregation funded by the government) - KRC which is expertised in many years of experience about agriculture and farmland could provide a one-stop service like advertising, counseling, applying, contracting a pension. Since KRC has 93 branches all around the country , elderly farmer could have the advantage of face-to-face counseling, applying.

 7. Who were the stakeholders involved in the design of the initiative and in its implementation?
- In 2011, the first year of project implemention achieved the goal of 911 pension subscribers successfully that is 182% over than planned. Second year of 2012, achieved the goal attainment in excess of 1,291 pension subscribers, the average monthly pension payments as of end-2012, this was a 810 dollar almost 90% of the minimum cost of living in Korea (year 2012 basis) The result showed us that Farmland pension plan supports the livelihoods of elderly farmers solidly

 8. What were the most successful outputs and why was the initiative effective?
1) Farmland Pension subscriber satisfaction survey Satisfaction survey annually to the pension system and used for improving and developing Farmland Pension plan 2) Risk assessment by specialist Assessment risks as interest rate, agricultural price, expected life, termination rate of contract by specialist aiding to maximize annuity and to prevent loss of government fund 3) Examining and analyzing at every cancellation Examining and analyzing the reasons about subscriber termination of agreements at every cancellation 4)Operating professional web site of pension plan operating professional farmland pension sites separately making familiar with the potential subscriber to allow access through the questions and answers

 9. What were the main obstacles encountered and how were they overcome?
- Farmers misunderstanding : government would be taken away owned farmland when applying the pension plan - Government : the pension fund's financial stability in long-term basis - Overcome 1) Promotion to Farmers actively : visiting the rural town hall and the marketplace of farmers residing to explain the pension system. 2) Government: prepared farmland pension model to preserve loss of government fund

D. Impact and Sustainability

 10. What were the key benefits resulting from this initiative?
- In spite of underdeveloped Welfare system for elderly people particularly in rural areas, elderly farmer under Farmland pension can continue farming without selling of farmland and live in a stable life independently without relying on the child - Farmland pension plan as well as the goals of farmland preservation that is consistent with government policy. - If the elderly farmers dispose farmland that would be dedicated to other purposes other than farming, the much more likely there is a risk of the disappearance of farmland and threaten the long-term agriculture in the Republic of Korea - Therefore farmland pension scheme supports elderly farmer's income during the rest of their life and contributes to the policy goal "maintenance of farmland" - In addition, government saves enormous social costs to support elderly farmer's income.

 11. Did the initiative improve integrity and/or accountability in public service? (If applicable)
1) Sustainable Because any elderly farmers who possess farmland are eligible for farmland pension, we expect continuous supply of new eligible elderly farmers 2) Transferable Because the aging rate of rural area is continuously increasing and measures to support elderly farmer's income are needed worldwide, any country government which have elderly farmers whose major portion of property is farmland can apply farmland pension scheme. In fact, Director of Asia Pacific Food and Fertilizer Technology Center, Taiwan (FFTC) who visited Farmland bank of KRC also expressed great interest in the farmland pension. He introduced Farmland pension on the Agency website and distributed explanatory material to each university (November, 2013). The Mountain Forest Service agency in the Republic of Korea benchmarked farmland pension scheme and examined "moutain forest pension". Therefore we expect farmland pension can be applied to any country in similar situation with the Republic of Korea.

 12. Were special measures put in place to ensure that the initiative benefits women and girls and improves the situation of the poorest and most vulnerable? (If applicable)
- If eldery farmers are free charge on the government pension plan, there will be funding including tax increases and government bond issue which would go through the process of a financial burden on the people in Korea by resulting in relatively controversy and bringing another issue of disadvantaged people discrimination. - Farmland pension plan could be a solution in this controversy The elderly farmer-owned agricultural land as collateral to a pension for life could be the right government policy without additional financial commitment for elderly farmers through the establishment of self-rescue retirement measures stability - Pension system is also acting an incentives to get back in rural and solving the problem caused by the hollowing out of rural agricultural society by encouraging self-esteem of farmers, as well as an opportunity to raise awareness of the importance of agricultural farmland significantly

Contact Information

Institution Name:   Korea Rural Community Corporation
Institution Type:   Government Agency  
Contact Person:   Jisun Lee
Title:   Miss  
Telephone/ Fax:  
Institution's / Project's Website:  
Postal Code:  

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