Pension Income Tax (3.3–5.5%)
The money you built up receiving tax credits through pension savings/IRP—how much tax do you pay when you later withdraw it as a pension? The older you are the lower the rate, and the annual amount received determines the taxation method.
What Is a Private Pension?
The pension income tax discussed here is the tax that attaches to a "private pension." A private pension refers to receiving, as a pension after age 55, amounts you accumulated while receiving tax credits (like pension savings/IRP) or that grew from investment gains.
Public pensions like the National Pension have a different taxation method (a separate comprehensive taxation system), so they are distinguished from the private pension covered here.
A private pension, "if received split out as a pension," ends with the low-rate pension income tax; "if taken out as a lump sum all at once," a 16.5% other-income tax is levied. So receiving it slowly, split out, is advantageous in terms of tax.
Rates by Age: 5.5% at 55 → 3.3% at 80
The rate when receiving a private pension in pension form falls with your age at the time of receipt (all include local income tax).
Ages 55–69: 5.5%
Ages 70–79: 4.4%
Age 80 and above: 3.3%
Since it's a structure where the rate falls the older you are, if you're not in a hurry, delaying receipt a bit to be taxed at a lower rate can be a tax-saving strategy.
Compared with the 15.4% on financial income in an ordinary account, it's less than half the level, which immediately reveals why "receiving slowly as a pension" is advantageous.
For a life-annuity type (received until death), 4.4% may apply, and the like—the rate can vary by the form of receipt.
The 15 Million Won Threshold and the Taxation Method
The story changes when private pension receipts grow large. If the private pension received from the tax-credited principal and investment gains exceeds 15 million won a year, it does not end with low-rate withholding, and you must choose one of the following two.
Comprehensive taxation: combined with other income and calculated at progressive rates (6–45%).
Separate taxation: 16.5% (income tax 15% + local tax 1.5%) is levied on the entire private pension and separated out.
For high-income people, the rate can jump greatly under comprehensive taxation, so choosing 16.5% separate taxation may be advantageous; if other income is small, comprehensive taxation may be better. Whether it's favorable or not splits by your situation.
A point to watch is that even exceeding 15 million won by "just 1 won" makes this elective taxation apply to the entire private pension. So a strategy of dispersing the receipt timing to keep it at 15 million won or less a year is also used.
This threshold was 12 million won a year in the past and was raised to 15 million won from 2024; it is current as of July 2026. The tax regime may be revised.
Frequently Asked Questions
Q. Is the 15 million won threshold based on the entire pension?
It is based on the "private pension" received from the tax-credited contribution principal and investment gains. Public pensions like the National Pension, or the principal portion that did not receive a tax credit, are not included in this 15 million won calculation. Since the taxable target is divided by account, it is accurate to check the taxable amount with your financial company before actual receipt.
Q. If I delay receipt, does the tax really shrink?
Looking only at the age-based rates, 3.3% after age 80 is lower than 5.5% for ages 55–69, so the rate is more favorable the later you receive. However, if you defer too long you may not be able to use it when you actually need it, or the annual receipt amount may grow and exceed the 15 million won threshold. Rather than deferring unconditionally based on the rate alone, you should judge together with your living-funds plan.
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