Taxes6 分で読めます

Calculating the Pension Savings Tax Credit

The saying "put money in pension savings and get tax back" at year-end settlement—exactly how much do you get back? If you just know the limit and the credit rate, you can calculate your own refund yourself.

What Is a Tax Credit?

The biggest appeal of pension savings is the "tax credit." A tax credit is a method that directly subtracts a set amount from the tax you must pay (computed tax).

The similar-sounding "income deduction" reduces the base on which tax is levied (the tax base), so for the same amount, a tax credit gives a more directly felt benefit.

When you put money into pension savings/IRP, a certain proportion (the credit rate) of the amount you contributed is cut from your tax at year-end settlement. It's the state's incentive to encourage saving for retirement.

However, this benefit has the structure of "cutting tax now in exchange for taxation later when you withdraw it as a pension." Remember that it is less an exemption of tax and more a deferral (tax deferral).

Limits: 6 Million Won for Pension Savings, 9 Million Won Combined with IRP

There is a limit on the contributions eligible for the tax credit.

Pension savings alone: up to 6 million won per year.

Pension savings + IRP combined: up to 9 million won per year.

So if you fill 6 million won in pension savings and add 3 million won more in the IRP, all 9 million won combined becomes eligible for the tax credit. Conversely, you can also fill 9 million won with the IRP alone.

Money contributed above the limit does not receive the tax credit, but the tax-deferral benefit on investment gains remains. However, excess contributions can complicate the withdrawal rules later, so contributing within the limit is cleaner.

These limits are current as of July 2026. Pension tax rules are frequently subject to revision, so before contributing, check that year's limit through the National Tax Service or your financial company.

Credit Rate: 16.5% or 13.2% Depending on Total Salary

The credit rate splits into two paths depending on income level.

Total salary of 55 million won or less (comprehensive income of 45 million won or less): 16.5% (income tax 15% + local income tax 1.5%)

Total salary above 55 million won: 13.2% (income tax 12% + local income tax 1.2%)

It's a structure that gives a higher credit rate to those with lower income. If you're new to the workforce, 16.5% will generally be more likely to apply.

A point to watch is that this is a refund "from within the tax you paid," so if the tax you owe in the first place (the determined tax) is less than the credit amount, you only get back that much. For a student with almost no income and zero tax to pay, the tax-credit effect will not be large.

Example of Calculating Your Refund

The formula is simple: eligible contribution × credit rate = refund.

Example 1) Total salary 40 million won, pension savings 6 million + IRP 3 million = 9 million won contributed → 9 million × 16.5% = 1.485 million won refunded.

Example 2) Total salary 70 million won, 9 million won contributed → 9 million × 13.2% = 1.188 million won refunded.

Example 3) Total salary 45 million won, pension savings only 6 million won contributed → 6 million × 16.5% = 990,000 won refunded.

Contributing 9 million won and getting 1.485 million won back is effectively earning a "guaranteed tax-saving return" of 16.5% in the first year. However, you must also consider that this money is, in principle, long-term funds to be withdrawn as a pension after age 55, and that pension income tax applies when you withdraw it.

The refund is, after all, a tax-saving effect, not an investment return. The funds/ETFs run inside a pension account can incur losses, and the tax credit does not make up for principal losses.

よくある質問

Q. Between pension savings and IRP, which should I fill first?

Looking only at the tax-credit limits, a common combination is to fill 6 million won in pension savings first and add the remaining 3 million won via the IRP to reach 9 million won. Pension savings have no restriction on risky-asset investment, while the IRP has a rule allowing only up to 70% in risky assets, so the freedom to manage them differs. Rather than one being "unconditionally better," it's a matter of dividing them to fit your own management style.

Q. Is getting the tax credit always a gain?

The first-year tax saving is a clear advantage, but this money is long-term funds to be withdrawn as a pension after age 55. If you terminate mid-term, a 16.5% other-income tax is levied on the tax-credit portion you received and on the investment gains, so the benefit disappears or can even become a loss. Checking first whether it's "money you can leave buried for a long time" is the right order.