“From this year, if you adjust the income received from private pensions like pension savings to 1.25 million won per month (15 million won per annum) or less, a lower tax rate will be applied. Additionally, if you continue earning salary or business income or have financial leeway even after the age of 55, delaying the commencement of pension receipt can help save taxes.
According to the Financial Supervisory Service on the 19th, the threshold for separate taxation of pension income will increase from 12 million won to 15 million won annually from this year. Therefore, for tax savings, it is wise to adjust the annual pension receipt to 15 million won or less.
If you receive 15 million won or less annually, a low pension income tax rate (3.3%~5.5%) applies, but if it exceeds 15 million won, the entire pension amount must be consolidated with other income for comprehensive taxation (6.6%~49.5%) or separated taxation (16.5%).
Additionally, it is advantageous to delay the start of pension receipt if you continue to earn salary or business income or have the financial capacity after age 55.
For instance, in the case of a fixed-term pension, the income tax rate applied at the time of pension receipt decreases to 5.5% for ages 55-59, 4.4% for ages 70-79, and 3.3% for age 80 and above.
Also, for lifetime pensions, a pension income tax rate of 4.4% is applied if you are between 55 and 79 at the time of pension receipt, and 3.3% if you are 80 or older.
Moreover, receiving retirement benefits in the form of a pension rather than a lump sum provides more tax benefits.
If the retirement benefits are received annually within the pension receipt limit, 30% of the retirement income tax is reduced until the 10th year. From the 11th year onward, there is no pension receipt limit, and 40% of the retirement income tax is reduced.
Isang-Tak, the team leader of the Pension Supervision Team at the Financial Supervisory Service, explained, “If you must withdraw from the pension savings due to unavoidable reasons, you must check the limit and the deadline for submitting documents”, adding, “For purposes like nursing or medical expenses, low taxation applies only if it is within the withdrawal limit stipulated by tax law. However, supporting documents must be submitted to the financial institution within 6 months.”
Unavoidable withdrawal reasons include ▲natural disasters ▲the death or international relocation of the subscriber ▲the need for care for more than 3 months for the subscriber or their dependent family ▲damage requiring hospitalization for more than 15 days due to a social disaster ▲individual rehabilitation or bankruptcy declaration ▲suspension of business, license cancellation, or bankruptcy of the pension operator.
Meanwhile, the Financial Supervisory Service operates a ‘Unified Pension Portal’ where you can view all pension-related information at a glance. By using the ‘My Pension Inquiry’ service within the portal, you can easily ascertain the accumulated amount and the expected start date of all pension products you’ve subscribed to.”