Pension Savings vs. IRP: A Complete Guide to Individual Retirement Pensions (2025)
Before, I just contributed to a DC (defined contribution) plan through my employer. But last year, during year-end tax settlement, I realized I hadn't maxed out my tax deduction limit. So I scrambled to study up, and now I'm running both accounts. Here's my summary.
1. Tax deduction limit: Pension Savings 6 million KRW + IRP 3 million KRW = up to 9 million KRW total. However, if your total salary is 55 million KRW or less (or comprehensive income 40 million KRW or less), the entire 9 million gets a 16.5% deduction; if your income exceeds that, the rate is 13.2%.
2. The deduction rate varies by income bracket. If you earn over 100 million KRW, 13.2% applies, so just keep that in mind.
3. IRPs are hard to terminate early. If you cancel one, you have to pay back 16.5% in other income tax. The same goes for Pension Savings.
4. Investment options: Pension Savings lets you pick funds/ETFs directly, while IRPs allow a mix of deposits, funds, and ETFs. I went all-in on S&P 500 ETFs in both.
- The standard way to build an IRP is by transferring your retirement payout when you change jobs, but you can also make additional contributions of up to 3 million KRW per year and still get the deduction.
- For Pension Savings, opening an account at a securities firm and buying ETFs comes with lower fees than going through an insurance company.
- Rather than just dumping money in around December, set up a monthly auto-transfer. It's easier on your wallet, too.
I'm still in my 30s, so I'm focusing more on long-term compounding than on tax deductions. If you're like me and only remember this when year-end rolls around, I recommend opening an account early—even if you don't put money in right away.
6 answers
Oh, I didn't know this.
Yeah, it's indeed a securities firm.
I was in the same boat last year—couldn't hit the 9 million won mark during year-end settlement, so I opened an IRP on top. But honestly, the most annoying part was sorting out the accounts when transferring my retirement money. Also, I used to think pension savings only took mutual funds, but everyone knows ETFs are eligible these days, right? Anyway, seems like the key is just contributing consistently.
Hmm, that's a bit... Isn't that something that changed in 2025 based on a total salary of 55 million? Let's double-check before writing.
It's true that you forfeit 16.5% if you terminate your IRP early. I also went through a hassle transferring my severance pay when I switched jobs, but it's better to open an IRP at a securities firm and run it with ETFs.
Isn't going all-in on the S&P 500 a bit risky?