Comprehensive Guide to Pension Taxes... Mirae Asset Retirement Research Institute Publishes 'Understanding Taxes to See Pensions'

A Focused Summary of Pension Tax System Changes This Year

[Asia Economy Reporter Minwoo Lee] Mirae Asset Retirement Research Institute has published a report summarizing pension-related tax issues by timing, such as accumulation, withdrawal, and receipt.

Mirae Asset Retirement Research Institute announced on the 29th that it published "You Need to Know Taxes to Understand Pensions," which contains these details. This is the second revised edition of "Pensions and Taxes," first published in 2016.

The report summarized this year's pension tax system into three main points. First, individuals can accumulate pension assets on their own. To support the baby boomer generation approaching retirement, the tax credit limit for pension accounts of residents aged 50 and over will increase by 2 million KRW for three years starting this year. It also allows the transfer of matured funds from Individual Savings Accounts (ISA) to pension accounts, with a tax credit of 10% on the transferred amount up to a limit of 3 million KRW.

It also pointed out efforts to prevent leakage of retirement funds and support pensionization. The conditions for mid-term settlement of retirement benefits related to medical expenses have been strengthened, and from next month, retirement benefits can only be settled mid-term if medical expenses exceed 12.5% of total wages. Previously, if retirement benefits were received as a pension, pension income tax equivalent to 70% of the retirement income tax rate was imposed regardless of the pension receipt period. Now, the pension income tax has been partially eased, such as reducing the tax rate by an additional 10 percentage points after the actual pension receipt period exceeds 10 years.

The pension income gap is also expected to be alleviated. The report explained, "The government has generally expanded tax benefits related to pensions while increasing the tax burden on high-income earners," citing as a representative example the reduction of the retirement income recognition limit for corporate executives from three times to two times.

The report is available in e-book format on the Mirae Asset Retirement Research Institute website. A book giveaway event is also being held on the institute’s Facebook account. Kim Dongyeop, head of the Retirement Education Center at Mirae Asset Retirement Research Institute, said, "When preparing for retirement with limited income and assets, 'saving' is important, but 'strategy' is also necessary," adding, "Since the pension system is based on tax law, understanding tax law is essential to properly establish a retirement preparation strategy."

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