Pension savings and IRP for foreign employees — 16.5% back, but check when you plan to leave Korea

A pension savings account and an IRP are the biggest tax credits most employees in Korea can control. Foreign employees can use them too — but unlike Korean colleagues, many will leave Korea long before 55, and that changes the math.

All figures are for the 2026 tax year under the normal method. With the 19% flat rate there is no pension credit at all.

The two accounts

	Pension savings (연금저축)	IRP (개인형 퇴직연금)
Where	Securities firms, banks, insurers	Securities firms, banks, insurers
Withdraw before 55	Possible, with the tax described below	Only for legally defined reasons — otherwise you close the whole account
Investments	Funds and ETFs, up to 100% in equities	Risky assets capped at 70%
Also holds	—	Severance pay from your employer, when you change jobs

You open them yourself, with your Alien Registration Card. Each provider sets its own rules for foreign customers, so check before you apply.

What the credit is worth

Credited amounts: up to ₩6 million in pension savings, and up to ₩9 million in pension savings and IRP combined. The rate depends on your total salary (after non-taxable pay):

Total salary	Credit (incl. local income tax)	₩6M pension savings	₩9M (₩6M + ₩3M IRP)
₩55 million or less	16.5%	₩990,000	₩1,485,000
Over ₩55 million	13.2%	₩792,000	₩1,188,000

If you only use pension savings, ₩3 million of the ₩9 million limit goes unused — the extra ₩3 million has to go into an IRP. The contribution deadline is December 31; a single payment in December counts for the whole year.

The credit cannot exceed your tax

The credit only reduces tax you would otherwise pay. At lower salaries, you run out of tax before you reach the limit. For a single person with no other deductions, the calculator gives:

Total salary	Income tax without pension	Saved by ₩6M pension savings
₩30,000,000	₩482,125	₩482,125 — the whole tax
₩32,000,000	₩613,746	₩613,746 — the whole tax
₩35,000,000	₩955,837	₩900,000
₩40,000,000	₩1,560,457	₩900,000

Income tax only; local income tax adds 10% to each figure. At ₩30 million, about ₩3.2 million of contributions already brings the tax to almost zero — anything more earns nothing that year. Family, card spending and other credits lower your tax further, so put your own numbers into the calculator before deciding how much to contribute.

If you leave Korea before 55

This is the part most guides written for Koreans skip.

Closing a pension savings account or IRP before 55 (or withdrawing from pension savings early) is taxed at 16.5% (other income tax plus local income tax) on the contributions that received a credit, plus all investment gains. There are exceptions for legally defined hardship reasons — long-term medical treatment, bankruptcy and similar — but leaving Korea is generally not one of them. The “emigration” reason in the law refers to emigration reported under Korea’s Overseas Emigration Act, which is for Korean nationals. Confirm with your provider before you close the account.

So for someone who contributes ₩6 million a year for three years and closes the account when leaving:

Total salary	Credit received over 3 years	Tax when closing (on ₩18M)	Net
₩55 million or less	₩2,970,000 (16.5%)	₩2,970,000	₩0, plus 16.5% on any gains
Over ₩55 million	₩2,376,000 (13.2%)	₩2,970,000	−₩594,000, plus 16.5% on any gains

The credit is not free money if you leave early — it is a loan you repay at closing, and above ₩55 million you repay more than you received. It works in your favour only if you stay in Korea past 55, or keep the account open and draw it as a pension from 55. Pension withdrawals are taxed at 3.3–5.5%. How that is taxed once you live abroad depends on your residency and your country’s tax treaty with Korea, so ask the provider before you count on it.

Contributions that never received a credit — for example in a year you used the 19% flat rate, or above ₩9 million — come back without the 16.5% tax. Keep a record of those years, because the provider needs proof of which amounts were not credited.

Who it suits

Your plan	Pension savings / IRP
Staying in Korea long term	Yes — pension savings first up to ₩6M, then IRP for the next ₩3M
Leaving within a few years, salary ₩55M or less	Little gain; the credit comes back out when you close
Leaving within a few years, salary over ₩55M	Likely a loss if you close the account
Using the 19% flat rate	No credit; only tax-deferred growth

If you do contribute, fill pension savings before the IRP. The credit is the same, but pension savings can be withdrawn partially, while an IRP generally has to be closed in full.

Not the same as the National Pension

The National Pension (국민연금) is the mandatory 4.75% taken from your monthly pay. It has nothing to do with this credit. Depending on your nationality and visa, you may be able to claim a lump-sum refund of it when you leave Korea — that is a separate procedure with the National Pension Service.

Common questions

My employer already has a retirement pension plan. Can I still open an IRP? Yes. What you pay into your own IRP earns the credit; what your employer pays into its plan does not.

Can I contribute more than ₩9 million? You can pay in up to ₩18 million a year, but only ₩9 million is credited. The rest grows tax-deferred and comes back without the 16.5% tax on the principal.

Does the credit show up in my monthly pay? No. It is applied at the year-end settlement — submit the contribution certificate from your provider, or let it come in through the Hometax simplified data.