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Retirement Benefit vs. Retirement Pension

  • 1.

    In Retirement Pension Plan, a company prepares employees' retirement benefit by paying contributions regularly. Contribution is the money paid for the employee's retirement benefits.

    In terms of employers, financial stress to make a lump-sum benefit when an employee retires is reduced. when an employee, the right to receive the retirement benefits is strengthened.

  • 2.

    Retirement benefits paid by the company accumulated to financial institutions and the reserves managing status is monitored. When the employee retires, the financial institution pays the employees’ benefits as lump-sum or annuity even though in case of the company’s default.

    It means that the right to receive the retirement benefit is strengthened and the right to select the form of benefit collection is diversified.

Structure of Retirement Pension Plan

Severance Payment Plan and Retirement Pension Plan at a Glance

Check the differences between retirement lump-sum plan and retirement pension plan.

Classification Retirement lump sum plan Retirement pension plan
Retirement (contribution) reserve Funding within the company
(voluntary external funding)
Mandatory external funding
Investment Responsibility Company Company(DB) / Employee(DC)
Receive retirement benefit Early Withdrawal Not possible
(Allowed to meet the
statutory requirements)
Limitedly allowed
(in special occasion to be
prescribed by the law)
How to receive retirement benefit Lump Sum only Lump Sum or Annuity
(Transferred into the IRP.
whether to receive lump sum or annuity)
Retirement benefit level 30days average wages for each
year of consecutive service x
Service year
DB : Monthly salary when retired ×
years of employment
DC :1/12 of total annual wage ±
investment return
(It depends on the individual
investment performance)
Guarantee vested rights Unsecured Secured as much as external funding
Early withdrawal is limited to prevent spending retirement benefits before retirement for living expense

Conditions prescribed by the presidential decree for a early withdrawal in retirement
lump sum plan

  • When a participant who did not own a house has purchased a house
  • When a participant who did not own a house pay a deposit for renting a house
  • When a participant or his/her dependent family members has received medical care for six months or more
  • When a participant has received a decision for commencement of a rehabilitation proceeding under the Debtor Rehabilitation and Bankruptcy Act
  • When a participant has been declared bankrupt under the Debtor Rehabilitation and Bankruptcy Act
  • When income reduced in accordance with implement of a salary peak policy
  • Where other reasons and conditions prescribed by the Ordinance of the Ministry of Employment and Labor, such as natural disasters, armed conflicts, etc
  • When income reduced in accordance with implement of a salary peak policy

Conditions for collateral loan or early withdrawal prescribed by the presidential in the retirement pension plan

  • When a participant who did not own a house has purchased a house
  • When a participant or his/her dependent family members has received medical care for six months or more
  • When a participant has received a decision for commencement of a rehabilitation proceeding under the Debtor Rehabilitation and Bankruptcy Act
  • When a participant has been declared bankrupt under the Debtor Rehabilitation and Bankruptcy Act
  • Where other reasons and conditions prescribed by the Ordinance of the Ministry of Employment and Labor, such as natural disasters, armed conflicts, etc