Pension Savings and IRP Tax Credit Tops Out at KRW 9 Million a Year -- The Rate Splits Around KRW 55 Million of Gross Salary, and Early Termination Costs 16.5%

The credit covers KRW 6 million for pension savings, and KRW 9 million once retirement pension is included

The pension account tax credit has two caps. Money paid into a pension savings account qualifies up to KRW 6 million a year, and if that is added to contributions to a retirement pension account such as an IRP and the total passes KRW 9 million a year, the excess is dropped from the credit. You can put KRW 9 million into an IRP alone, but because the pension savings amount up to KRW 6 million is counted first, many people use both accounts together.

The credit rate splits into 15% and 12% around KRW 55 million of gross salary

The rate is 12% as the base, and 15% if total income is KRW 45 million or less (for wage earners with no other income, gross salary of KRW 55 million or less). Because a 10% local income tax is added on top, the effective refund rates are 16.5% and 13.2%. The test is gross salary, not pre-tax annual pay, so you judge it after subtracting non-taxable items such as meal allowances. You can find your gross salary on the year-end tax settlement screen or on your withholding receipt, and if you changed jobs this year, the combined pay from both employers is what counts.

The limit is added up per person, not per account. If you open pension savings accounts at a bank and a brokerage, the KRW 6 million is calculated across both, and the same goes for IRPs opened in several places. For a couple, each person is judged on their own gross salary and contributions, so it is worth checking whether the lower earner falls into the 15% bracket. Contributing on behalf of your spouse does not qualify; check from your own account against your own income.

Filling KRW 9 million returns at most KRW 1.485 million

The math is simple. KRW 9 million times 16.5% is KRW 1.485 million, and times 13.2% it is KRW 1.188 million. If you only put in KRW 6 million for pension savings, that is KRW 990,000 and KRW 792,000. However, a tax credit cannot return more than the tax you actually owe. People with a small determined tax may not be able to use the full credit, so it is more accurate to check the expected refund in the Hometax year-end settlement preview.

The contribution limit is KRW 18 million a year, but the credit stops at KRW 9 million

You can put up to KRW 18 million a year into pension accounts. Money above KRW 9 million gets no tax credit, but contributions that did not receive a credit are excluded from taxation when you later withdraw them, so it is worth keeping a separate record of each year's credited and uncredited amounts from your financial company's contribution statement. There is one exception: if you move ISA maturity funds into a pension account, the credit cap rises by 10% of the transferred amount, up to KRW 3 million. That extra credit applies only in the year of the transfer.

Early termination or withdrawal triggers 16.5% withholding

If you take out credited money and its investment gains in any form other than a pension, a 16.5% other-income tax (local income tax included) is withheld and taxation ends there as separate taxation. That is close to the rate you got back through the credit, so cashing out early wipes out the benefit in practice. For what is lost when you break a deposit or an insurance policy early, see our separate posts on early withdrawal of a term deposit and the surrender value of savings insurance. A pension account differs from both in that the tax recapture stacks on top.

To receive it as a pension, you must be 55 or older and 5 years past opening

The pension withdrawal requirement is that 5 years have passed since opening the account and you apply for pension payouts at age 55 or later. There is an annual limit: the pension payout limit is the account value divided by (11 minus the pension year number), times 120%. Any withdrawal above that limit is treated as an early withdrawal rather than a pension and is subject to other-income tax. So before you start, check your payout limit in your financial company's app or the Financial Supervisory Service's integrated pension portal. To time it with your public pension, read National Pension early vs. deferred claims as well.

When you receive the pension, age-based rates apply and KRW 15 million a year is the dividing line

The pension income tax on private pensions is 5% under age 70, 4% from 70 to under 80, and 3% at 80 or older (local income tax separate). If pension income is KRW 15 million a year or less, taxation ends with this lower separate rate; above that, you choose between comprehensive taxation and separate taxation. In 2026 there was a revision lowering the withholding rate on pensions received in lifetime form, so confirm whether it applies to you and from when with your financial company or the National Tax Service. Even at a low rate, you are in effect repaying the tax you recovered, so this works out well when the money is truly meant for retirement.

Check in this order before year-end

First, add up what you have already paid into pension savings and IRP this year, and check whether your gross salary is under KRW 55 million. Next, compare the room left under KRW 9 million with your determined tax to decide how much more to add. Payment must be completed by December 31, the settlement cut-off, to count for this year's credit. Transfers pile up at year-end and posting can slip to the next day, so leave a few days of margin rather than paying on the last business day. If a lump sum is a burden, set up monthly automatic transfers and top up only the shortfall at year-end. If money is tight this year, set the amount at what you can keep without ever cashing out. To view other deductions together, see the year-end tax settlement deduction checklist. This post is general information and does not determine your personal tax or eligibility for the credit. Please confirm exact amounts on the National Tax Service Hometax, with a tax professional, or with your financial company.