Ever been asked at work, "DB or DC for your retirement pension?" and picked one at random? That choice can meaningfully change what you walk away with.
In one line — DB: the company invests and you get a set formula amount; DC: you invest and the outcome is yours.
DB (defined benefit)
- The company manages and bears the risk.
- Your payout is final average wage × years of service, regardless of investment results.
- Better when wage growth is strong or a promotion is coming — a higher final salary means a bigger payout.
- Nothing to manage, but also no way to grow it.
DC (defined contribution)
- The company deposits at least one-twelfth of your annual wages into your account each year, and you invest it.
- Good results grow your payout; bad results shrink it. Losses are possible.
- Better when wage growth is limited, under a wage-peak system, or if you'll actually manage it.
- You can make additional contributions, which qualify for tax credits.
The common mistake: leaving a DC account parked entirely in principal-guaranteed deposits. It can fail to keep pace with inflation. Piling into risky assets is equally unwise — allocate to your own risk tolerance.
Where IRP fits
An IRP is an account you open yourself.
- It's the vessel that receives your severance when you change jobs or retire.
- You can add contributions while employed, with tax credits up to ₩9M combined with pension savings.
- You manage the investments, and taking it as a pension after 55 attracts lower pension income tax.
See the pension savings and IRP guide for the tax details.
When you leave a job
- Severance is generally paid into an IRP — open one in advance.
- Taking it as a lump sum triggers severance tax, while receiving it as a pension cuts that tax by roughly 30–40%. If you can wait, the pension route wins.
- If you change jobs often, consolidating in an IRP is simpler and more tax-efficient.
Estimate your severance with the severance calculator.
FAQ
Can I switch from DB to DC?
Sometimes, depending on company rules — but switching back from DC to DB is usually not possible. Decide carefully.
What if my employer goes under?
Retirement pension funds are held externally at a financial institution, separate from the company — that's the point of the system.
Can I withdraw early?
Only for legally specified reasons, such as buying a first home.
I don't know where my pension is.
The Financial Supervisory Service's integrated pension portal shows all your pension accounts in one place.
DB or DC is about who does the investing. Strong wage growth points to DB; confidence in managing it points to DC.
This is general information, not investment advice. Rules, taxes and company policies vary — check with your HR team and provider.
