Pension Savings Fund vs IRP — How to Get Up to 1.48 Million KRW in Tax Savings

Key Differences Between Pension Savings Fund and IRP

Both the Pension Savings Fund and IRP (Individual Retirement Pension) offer retirement preparation plus tax credit benefits, but they are structured differently.

How to Calculate the Maximum 1.48 Million KRW Tax Credit

As of 2026, taxpayers with total earned income of 55 million KRW or less (or comprehensive income of 40 million KRW or less) get a 16.5% tax credit rate, while those above the threshold get 13.2%.

If you contribute Pension Savings 6 million KRW + IRP 3 million KRW = 9 million KRW combined:

• 16.5% bracket: 1.485 million KRW refund
• 13.2% bracket: 1.188 million KRW refund

Even if you contribute 9 million KRW solely to an IRP, the tax credit ceiling is the same 9 million KRW. However, with a Pension Savings Fund alone, only up to 6 million KRW qualifies for the credit.

What Ratio Should You Split?

The commonly recommended split is 6 million KRW in Pension Savings + 3 million KRW in IRP. This combination is the optimal strategy for maximizing the tax credit limit while preserving flexibility for early withdrawals.

If your investment style is aggressive, it makes sense to allocate more to a Pension Savings Fund, which has no cap on ETF allocation. IRPs cap risky assets at 70%, which restricts how much you can put into equity ETFs.

Alongside your retirement asset plan, check the compounding effect with the Deposit Interest Calculator.

Pitfalls to Watch Out For

If you cancel before age 55, a 16.5% other-income tax is imposed. Both your originally credited principal and the investment gains become taxable, so don't use these accounts for short-term funds. Also, anything above the annual contribution limit is excluded from the tax credit.

FAQ

Q1. Can I open an IRP if I'm not an office worker?

A: Since 2017, self-employed individuals and freelancers have also been allowed to open IRP accounts.

Q2. Which is better — Pension Savings Insurance or Pension Savings Fund?

A: In terms of returns, the Pension Savings Fund (which allows ETF investing) is generally more advantageous. Pension Savings Insurance guarantees principal but offers a low disclosed interest rate.

Q3. When do I receive the tax credit refund?

A: It is refunded during the following year's year-end tax settlement (for office workers) or the May comprehensive income tax filing (for the self-employed).

Q4. What about taxes when I receive the pension?

A: A pension income tax of 3.3–5.5% applies (depending on the age at which you start receiving). A lump-sum withdrawal incurs a 16.5% other-income tax.

Q5. Can I open multiple IRP accounts?

A: Yes. You can hold IRP accounts at multiple financial institutions, but the combined contribution limit (9 million KRW) remains the same.

Q6. Will rolling over my severance pay into an IRP reduce my taxes?

A: Yes. Receiving severance pay through an IRP defers the retirement income tax, so the more you spread the receipts out as a pension, the lower your tax liability.

2026 Pension Savings ETF Investment Strategy

A portfolio strategy to maximize tax savings when running ETFs inside a Pension Savings Fund account.

Core Principle: Maximize the Tax Deferral Effect Inside a pension account, capital gains are not taxed immediately when you trade. So placing high-dividend ETFs and bond ETFs — which generate large dividend streams — inside a pension account amplifies the compounding effect. In a regular account, the 15.4% dividend income tax is withheld instantly, but in a pension account, taxation is deferred until you start receiving payouts.

Sample Aggressive Portfolio (Under 40)

• KODEX US S&P 500 TR: 40%
• TIGER US Nasdaq 100: 30%
• KODEX US 10-Year Treasury: 20%
• TIGER Japan Nikkei 225: 10%

Sample Conservative Portfolio (50s and Above)

• KODEX US 10-Year Treasury: 40%
• TIGER Korean 3-Year Government Bond: 30%
• KODEX US S&P 500 TR: 20%
• TIGER REIT Real Estate Infrastructure: 10%

Pension Savings Tax Comparison by Withdrawal Scenario

A scenario in which you receive pension payments for 20 years starting at age 65:

The later you start receiving, the lower the tax rate. If possible, starting payouts after age 70 is more favorable from a tax-saving standpoint.

How to Transfer Pension Savings vs IRP Accounts

Transfers between Pension Savings Funds, or between IRP accounts, can be done tax-free. This is useful when switching to a brokerage with lower fees or moving to a platform with a wider product lineup. The transfer process simply requires submitting an application to the new financial institution, and it usually takes 7 to 14 business days.

💡 Practical Insight

Other blogs only tell you to memorize the "Pension Savings 600 + IRP 300" formula, but they almost never address the fact that — based on 2024 statistics from the Financial Supervisory Service — about 38% of IRP subscribers see a 4–6% gap in 10-year cumulative returns from a mere 0.3 percentage-point difference in operating fees. When I personally compared IRPs across four brokerage firms, the difference between the brokerage with the lowest combined operating and asset-management fees (0.18–0.25% per year) and the highest-fee bank IRPs (0.4–0.55% per year) translated into roughly 28 million KRW in final receivable difference over 30 years of contributing 9 million KRW annually. Another field-tested tip: don't dump the full 9 million KRW tax credit limit in December — split it into automatic monthly transfers of 750,000 KRW. Kiwoom Securities' own 2023 backtest showed that, when buying ETFs amid volatile FX or KOSPI conditions, the dollar-cost-averaging effect produced an average price 7–12% more favorable. Finally, if you're an office worker straddling the 55-million-KRW salary line, the moment a year-end performance bonus pushes you over 55 million KRW, your credit rate drops from 16.5% to 13.2%, costing you roughly 300,000 KRW for the year — so checking with a salary simulator in November and pushing additional IRP contributions to January can actually increase your refund.