National Pension Scheme in Korea
1. Introduction
The National Pension system is a social insurance program operated pursuant to the National Pension Act, with the purpose of ensuring basic living stability by providing benefits to subscribers and their survivors in the event of income reduction due to old age, disability, or death. Where employees are hired in Korea, employers are also required under applicable laws to bear National Pension contribution obligations.
2. Main Content
#1 Type of National Pension Subscription
(1) Workplace-based insured person
Employees aged between 18 and under 60 years who work at a workplace in Korea are required to be enrolled in the National Pension Plan. Therefore, when an individually insured person finds employment, he/she is automatically transferred to a workplace-based insured person, and his/her qualification as an individually insured person is lost.
(2) individually insured person
Anyone residing in Korea who is aged between 18 and under 60 years and not a workplace-based insured person is classified as an individually insured person.
(3) Voluntarily insured person
Those who are not qualified for the above subscriptions can also become voluntarily insured persons if they apply for the subscription before an age of 60.
(4) Voluntarily and continuously insured person
If a subscriber or a former subscriber is not entitled to receive a pension due to lack of subscription period or applies for an extension of subscription period before an age of 65, he/she can remain as a voluntarily and continuously insured person.
#2 Insurance Premium and Payment
(1) Insurance Premium
Insurance premium for National Pension is calculated as multiplying the standard monthly income by the premium rate. The standard monthly income refers to the monthly income reported by the subscriber. The premium rate is 9.5% and the subscriber and employer must bear the half of the premium, which is 4.75% each. Insurance premiums for workplace-based insured persons are withheld from the employee’s salary and remitted by the employer.
On the other hand, individually insured persons and voluntarily & continuously insured persons must pay the full amount of the premium by themselves.
(2) Payment Method
The deadline for payment of insurance premium is the 10th day of the following month. If the 10th day is a weekend or national holiday, then the payment may be made on the next business day. This is the statutory deadline and if insurance premiums are not paid within the deadline, the employers should pay the late penalty fee.
#3 Type of pension
The National Pension is a social insurance that guarantees income of the subscriber who reaches a certain age or whose income decreases due to disability or death. The types of benefits are old-age pension (including pension splitting), disability pension, survivors’ pension, lump-sum refund, and lump-sum death benefit.
| Pension Benefit(monthly) | Lump-sum Benefit | ||
| Old-age Pension | Basic benefit for retirement and old-age income security. | Lump-sum Refund | Benefit paid in a lump sum when a subscriber cannot receive pension due to lack of qualification or is no longer available for subscription. |
| Disability Pension | Benefit designed to support a subscriber whose income has decreased due to disability. | Lump-sum Death Benefit | Benefit paid to funeral expenses or as compensation where survivors’ pension or lump-sum refund is not payable. |
| Survivors’ Pension | Benefit for protecting the livelihood of the bereaved family after the death of subscriber or beneficiary. | ||
3. Conclusion
The National Pension serves as a system to secure individuals’ retirement income, while at the same time constituting a statutory social insurance obligation for employers. Accordingly, foreign-invested enterprises conducting business or employing personnel in Korea should ensure that National Pension contributions are properly reported and paid in compliance with applicable laws and regulations.
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