As year-end tax settlement approaches, money is pouring into workers' pension accounts. That's because if funds are deposited into pension accounts by the end of Dec., taxpayers can receive a tax credit of up to 1,485,000 won. Securities firms are waging fierce competition, rolling out various benefits and promotions to attract customers.
According to Samsung Securities, KB Securities and others on the 27th, workers are rushing to funnel money into retirement pension savings and individual retirement pensions (IRP) ahead of the year-end tax settlement season. About 30% of the 2024 annual net deposits were concentrated in the two months of Nov.–Dec., and this year the net inflows into pension accounts have been on the rise since Oct.
Workers put money into pension accounts because they can receive a tax credit. The combined limit for tax credits across the two accounts is 9 million won, with a tax credit rate of 16.5% for those with total salary of 55 million won or less and 13.2% for those above that. Accordingly, those with total salary of 55 million won or less can receive 1,485,000 won, and those above that can receive 1,188,000 won.
Pension accounts also offer a tax deferral effect. In a regular investment account, 15.4% tax is levied on interest, dividends and ETF trading gains, but in a pension account, taxation is deferred until the account holder receives a pension after turning 55. Annual compound revenue can be enjoyed as is, and at the time of pension receipt, only a 3.3%–5.5% pension income tax is paid.
Pension savings are a private pension that individuals set up directly and are eligible for a tax credit up to 6 million won per year. You can manage them freely with ETFs and funds. IRP is a product that transfers severance pay to an individual account for management, and combined with pension savings, it is eligible for a deduction up to 9 million won per year. Its greatest strength is that it allows investment in almost every asset, including deposits, bonds, funds, ETFs and REITs.
Securities firms have launched a competition to attract new customers for pension savings and IRPs. Samsung Securities is giving coffee coupons to those who open a new IRP account by year-end and providing gift cards worth 10,000–30,000 won by adding up net deposits, severance deposits and transfers from other firms.
KB Securities gives a 5,000 won gift card to customers who open an IRP and deposit at least 100,000 won. In addition, it provides extra gift cards worth 10,000–30,000 won by net deposit tiers and offers benefits worth 20,000–30,000 won to customers who transfer from other firms. If customers make net purchases of bonds or funds within an IRP account, an additional 10,000 won gift card is provided.
Separate benefits are also attached to pension savings accounts. KB Securities provides a 10,000 won pension ETF coupon upon a net deposit of 100,000 won after account opening, and offers gift cards from at least 5,000 won to up to 1 million won depending on the net deposit amount. Depending on the transfer amount from other firms, customers can also receive up to 1 million won. If customers make net purchases of funds in a pension savings account, gift cards of 10,000–50,000 won are provided by tier.
Mirae Asset Securities offers benefits to both new and existing IRP customers depending on net deposit conditions. For deposits of 10 million–30 million won, it provides at least a 10,000 won gift card, and for deposits of 30 million won or more, it provides a gift card of up to 30,000 won.
Kiwoom Securities discounts ETF trading fees for one year for customers who newly open a pension account or transfer from another firm, and customers only need to bear the related institution expense of 0.0036%. Along with this, it awards up to five shares by lottery from major stocks such as AMC Entertainment Holdings, Tesla and Alphabet A. For first-transaction customers, it provides up to 10 shares of domestically listed ETFs, and depending on net deposit tiers, it also gives gift cards ranging from 5,000 won to up to 3 million won.
However, because pension savings and IRPs are accounts meant to preserve post-retirement living, an early termination triggers a 16.5% other income tax. For both accounts, the eligible age for pension receipt is 55 or older, and the minimum subscription period is five years. An official at a securities firm said, "If you make an early withdrawal, you must return all your previous tax-saving benefits, so it is necessary to contribute only funds that can be managed for the long term."