General office workers who are not self-employed are required to subscribe to a retirement pension from their company under the retirement pension system. You may remember receiving guidance on signing up for a retirement pension upon joining the company. However, it is difficult to find a company that properly explains what retirement pension is, how to inquire about it, and how to receive it.
We need to properly understand the fair severance pay we deserve and pay attention to it because it is connected to preparing for retirement. Let’s find out what retirement pension is, its types, how to view it, and how to receive it.
<Table of Contents>
1. What is retirement pension?
2. Glossary of retirement pension terms (DB, DC, IRP)
3. Check retirement pension
4. How to receive retirement pension
1. What is retirement pension?
Retirement Pension – Summary
Retirement Pension – Summary
Do you know exactly what a retirement pension system is? Companies (employers) are required to pay severance pay to employees (workers). The method of paying this severance pay is not to pay it directly to workers through the retirement pension system, but to manage and pay the severance pay on behalf of a financial company to ensure safe protection.
Pension type-and-classification
Pension type-and-classification
Retirement pension systems are divided into three types: defined benefit (DB), defined contribution (DC), and individual retirement pension (IRP). Workers can choose one of three ways while working, and can choose whether to receive severance pay as a lump sum or as a pension after retirement.
Retirement pension system-category
Retirement pension system-category
Tip) If you choose to receive severance pay through pension rather than all at once after retirement, you can receive a 30% tax reduction.
Tip) When choosing a pension, you need to compare because the fees, payment method, and payment period vary depending on the financial company.
2. Glossary of retirement pension terms (DB, DC, IRP)
When it comes to retirement pension choices and benefits, you need to properly understand the DB, DC, and IRP terms explained above.
1) Defined benefit type (DB)
The defined benefit plan is also called the corporate responsibility plan. Literally, a company can make profits or incur losses by managing funds in the way it manages workers’ severance pay. The company is entirely responsible for the profits and losses that occur at this time, and there is no change in the severance pay that the worker ultimately receives.
In general, if the salary increase rate is high, it is recommended to choose a stable defined benefit plan.
2) Defined contribution type (DC)
In a defined contribution plan, the individual takes full responsibility. You can literally choose a company to subscribe to a retirement pension and manage your pension through deposits, funds, ETFs, etc.
The company deposits 1/12th of the employee’s annual salary into the employee’s personal IRP account every year, and the employee manages this amount.
If a profit occurs as a result, it becomes the individual’s profit, and conversely, if a loss occurs, it also becomes the individual’s loss. Therefore, please choose it only if you have the ability to operate it properly.
3) Individual retirement pension IRP
It may seem like a new system just by hearing the name, but IRP refers to an account where you can receive retirement pension. You may have often heard of it as an IRP account.
IRP-Account Definition
IRP-Account Definition
An IRP account is not something that only office workers can create. Anyone with income can create one, and individuals can create and operate it regardless of whether they operate a retirement pension at work.
The advantage of this account is that you can pay an additional 18 million won per year, excluding the amount accumulated as retirement funds, and receive a tax deduction of up to 9 million won.
3. Check retirement pension
You can easily check your retirement pension on the Integrated Pension Portal website. The integrated pension portal provides various functions, such as comparing various pensions and checking my pension.
You can check your retirement pension by logging in directly through the link above or by accessing the homepage and clicking ‘Check My Pension’ in the center of the main screen.
In addition to registering as a member, you can also log in using the simple method below. Also, if you are looking for retirement pension for the first time, it will take 3-4 days, so if you want to check it urgently, please apply in advance.
Integrated Pension Portal-Login-Type
Integrated Pension Portal-Login-Type
This is something you can check when you log in.
national pension
Retirement pension (DB type)
Retirement pension (DC type, IRP)
personal pension
additional pension
You can check all information at a glance, including inquiries about all of your individual pensions, how much you can receive, and your subscription route.
4. How to receive retirement pension
There are two ways to receive retirement pension.
1) Receipt of lump sum payment
This is a method of receiving all severance pay as a lump sum upon retirement. In this case, retirement income tax and other income taxes of 16.5% are imposed on the retirement amount.
To receive a lump sum, the payment date may vary depending on the bank you are enrolled in, and usually takes 2 to 3 days.
2) Pension receipt
You can receive it as a pension, and the advantage is that the retirement income tax levied on lump sum receipt is reduced by 30% for 10 years and 40% after the 11th year.
It is more advantageous than receiving a lump sum because you can pay the retirement income tax levied at once by dividing it into reduced amounts, but please receive it according to your individual circumstances.
Pensions are our rights and our hope for the future. You need to know what the types are and what the terms mean. I also hope you fully understand how to operate and receive it.