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Individual Retirement Pension

lastmod 2025-07-21created 2025-07-213 edits

As the name says, a retirement pension scheme in which the individual handles everything from paying in the investment money to managing the assets. Originally only wage earners could join, but since July 2017 anyone with income can. So self-employed people and freelancers can also join. Of course, the unemployed, who have no 'retirement', cannot join.

An IRP can be opened at any financial institution that provides retirement pension services. Through an IRP, retirees can invest their severance pay in performance-based products such as funds and ETFs, or in principal-and-interest-guaranteed products such as deposits and savings insurance. Here, as with a defined contribution (DC type) retirement pension, performance-based products can invest only up to 70% in risky assets such as stocks, so relatively stable investment is possible. Also, because these are retirement-pension-only products, fees are lower than for ordinary funds.

For those retiring on or after April 14, 2022, joining an IRP became mandatory rather than optional in order to receive severance pay. As society ages, it is becoming difficult to prepare for this through National Pension fund management alone; meanwhile, many retirees spend their severance pay on living expenses after receiving it and fall into poverty with no assets after retirement. To reduce the social costs this causes, severance pay is received only through an IRP to encourage more active retirement pension saving. Still, unlike the National Pension, which you can never withdraw from, an individual can cancel an IRP through their bank at any time they want and receive a lump sum. It is also possible to cancel at the same moment as joining and receiving severance pay. However, in that case at least 16.5% retirement income tax, and depending on the bank a small cancellation fee, are deducted, and the amount lost this way is considerable. This is also why people hesitate to receive a lump sum and use it as living expenses, and when someone really needs the money for loan repayment, medical bills, etc. and reluctantly ends up cancelling the retirement pension, the amount is painful enough that some people criticize it as punitive taxation.

In the following cases, the retirement pension can be received into an ordinary bank account instead of an IRP.

  1. Retirement after age 55
  2. Total retirement benefit of 3 million won or less
  3. When you provide proof that the retirement benefit is used to repay a mortgage loan
  4. When making an interim settlement for reasons such as buying a home, a jeonse deposit, illness, individual rehabilitation/bankruptcy, or natural disasters

IRPs have management fees. That is, IRP fees differ between banks, insurers, and securities firms, so compare carefully before joining. Also note that the products you can invest in differ.

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