How does the National Pension Service (NPS) work in South Korea?

South Korea's National Pension Service collects 9% of standardised monthly income, split equally as 4.5% from the employee and 4.5% from the employer. Benefits are an indexed lifetime annuity from age 65 (for those born 1969 or later), with the amount based on your insured years and average covered income. It is the mandatory first pillar of retirement income.

What is an IRP and how does it help?

An Individual Retirement Pension (IRP) is a voluntary defined-contribution account. You can deduct contributions up to about 9,000,000 won per year (combined with pension savings), and the pot grows tax-deferred until you draw it as an annuity or lump sum. It tops up the National Pension, which alone usually replaces only part of pre-retirement income.

How is the National Pension annuity estimated here?

The tool uses a simplified replacement model: the National Pension roughly targets around 40% of the lifetime average covered wage for a 40-year contribution history, scaled down for fewer years. Your real benefit depends on the official A-value, B-value and accrual formula, so treat the figure as a planning guide rather than an exact entitlement.

How is the IRP pot turned into monthly income?

The IRP/DC balance is converted with a simple safe-withdrawal estimate of about 4% a year, divided by twelve. In practice you would buy an annuity or draw the pot down over your expected lifespan, so the actual monthly figure varies with annuity rates and how long you live.

Does this account for inflation and tax?

No. Figures are shown in today's won at the returns you enter, so high inflation will reduce their real value. The National Pension is indexed, but private IRP withdrawals are taxed as pension income (typically 3–5%) or other income. Confirm specifics with a Korean financial adviser.

South Korea Pension & Retirement Calculator

Email me this result

Get this tool's output sent to your inbox, plus one useful tool a week. No spam, unsubscribe any time.

This South Korea retirement calculator projects the income you can expect from the two pillars most Korean workers rely on — the mandatory National Pension Service (NPS) and a voluntary IRP / DC account. It grows each pot to your retirement age and turns the result into an estimated monthly figure so you can see whether your savings are on track.

How it works

The National Pension collects 9% of your standardised monthly income, with you and your employer each paying 4.5%. The benefit you receive is not simply the sum of contributions: it is a lifetime annuity based on your insured years and the average covered wage. This tool uses a simplified replacement target — roughly 40% of average covered income for a full 40-year history — scaled by your actual contribution years:

nps replacement ≈ 0.40 × (insured years / 40)
nps annual pension ≈ nps replacement × annual covered salary

The IRP / DC pot is a straightforward compounding account: your existing balance plus monthly contributions grow each month at the return you set. At retirement it is converted to income with a simple safe-withdrawal estimate:

annual income ≈ IRP corpus × 4%

The two streams are added to give a combined monthly retirement income and a replacement rate against your current salary.

Example

A worker aged 35 retiring at 65, earning 4,000,000 won a month, with 30 future contribution years and a 20,000,000 won IRP balance topped up by 400,000 won a month at a 5% return, builds a meaningful private pot while the National Pension contributes a steady indexed annuity. Together they replace a useful share of pre-retirement income, with the National Pension forming the stable base.

Notes

Figures are in today’s won at the returns you enter — inflation erodes their real value over time. The National Pension estimate is a simplified replacement model, not the official A-value/B-value formula. IRP withdrawals carry their own pension-income tax. This is a planning estimate, not financial advice.