Overview of Retirement Pension

Change in Retirement Pay System

The current retirement pay system, which was introduced 40 years ago, has not properly reflected social changes hitherto. Frequent job quitting, early settlement of retirement allowances, and early retirement make severance pay be spent just as a living cost, leaving little for a later life income. On the other hand, the retirement pension plan, introduced after December 2005, has properly reflected the rapid social and economic changes, helping workers enjoy a better later life.

퇴직금제도의 변화를 살펴보면 변경전에는 퇴직(일시)금제도만 있었으나, 변경 후에는 퇴직급여제도로서 확정급여형퇴직연금제도, 확정기여형퇴직연금제도, 퇴직일시금제도가 있으며 퇴직연금제도로서 확정급여형퇴직연금제도, 확정기여형퇴직연금제도, 개인형퇴직연금제도가 있습니다.

Lump-sum severance pay plan vs. Retirement pension plan

Lump-sum severance pay plan

  • Since July 26, 2012, the early settlement of severance pay has been banned.
    available only for a house purchase for non-home, house rental, over 6 months of medical treatment, bankruptcy and personal revival
  • Severance pay is given as a lump sum, leading it to be spent just for living expenses, and leaving little for a later life income.
  • The company reserves severance pay, so when it goes bankrupt, the system cannot protect employees’ right to claim benefits.
  • Debts on severance pay are difficult to forecast, increasing the company’s burden of shouldering lump-sum payment.

Retirement pension plan

Better benefit eligibility
Retirement benefits are reserved in a reliable financial institution and the benefit eligibility for employees is secured
Various ways to receive retirement benefits
Employees can receive retirement benefits as a lump-sum allowance or a pension.
Aggregation of retirement benefits
Regardless of job transfers, employees can reserve retirement benefits while enjoying tax deferrals on their retirement income tax before retirement.
Taxable income reduction
Availability of taxable income reduction on additional reserve by employees: Up to KRW 7 million including pension savings (as of 2015)
Tax-free investment profits during reserve period
Tax-free : Investment benefits from retirement pension are not taxed (tax deferrals)
Tax deferral on retirement income
Retirement income tax is deferred until employees receive retirement benefits, thus increasing real income.

Foreign Exchange Rate

2019/07/19 18:06:06
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