DB vs DC vs IRP: The Full Comparison
How to check whether your company runs DB or DC
Whether you need to worry about investment performance or contribution amounts depends entirely on which retirement pension type your employer runs. The fastest way to check is the annual retirement pension status notice you receive, or the paperwork HR shares during year-end settlement — both state the plan type directly. If you don’t remember seeing one, simply ask HR: “Is our retirement pension DB or DC?” Employment contracts and work rules often spell out the plan type too. If your company has not adopted a retirement pension plan at all, the statutory severance system under the Labor Standards Act applies instead — see the severance pay guide for that case.
DB vs DC — what gets fixed: the payout or the contribution
In a DB (defined benefit) plan, the payout amount is fixed in advance — typically the average wage of the last three months × years of service — and the employer bears the investment responsibility to fund it. Workers get a predictable amount regardless of investment performance. A DC (defined contribution) plan instead fixes how much the employer contributes each year (at least 1/12 of annual wages), and that money sits in the worker’s own account, invested by the worker — so the final payout depends on investment returns. Good returns can beat DB, but losses are also the worker’s to bear.
IRP is different — an account workers open themselves
An IRP (Individual Retirement Pension) is not something the employer enrolls you in like DB or DC — it is an account workers open voluntarily. It is commonly used both to roll over severance pay tax-deferred when changing jobs, and to make extra voluntary contributions while employed for the tax credit. Anyone can open one, whether or not they are enrolled in DB or DC.
DB vs DC vs IRP at a glance
| Category | DB (defined benefit) | DC (defined contribution) | IRP (individual) |
|---|---|---|---|
| What is fixed | The payout amount | Employer contribution (≥1/12 of annual wage) | Nothing — voluntary contributions |
| Who invests / bears risk | Employer | The worker | The worker |
| Enrollment | Automatic, employer-selected | Automatic, employer-selected | Voluntarily opened by the individual |
| Tax credit | None | None (only extra contributions) | Up to 9,000,000 KRW/yr combined with pension savings |
The IRP tax credit worked out — the 9,000,000 KRW annual limit
IRP contributions, combined with pension savings, qualify for a tax credit up to 9,000,000 KRW/year. The rate is 15% (16.5% including local tax) if your gross pay is 55,000,000 KRW or less, and 12% (13.2% incl. local tax) above that. Maxing out the 9,000,000 KRW limit at the lower rate saves 9,000,000 × 15% = 1,350,000 KRW (1,485,000 KRW incl. local tax); at the higher rate the same contribution saves 9,000,000 × 12% = 1,080,000 KRW (1,188,000 KRW incl. local tax). Actual savings also depend on other deductions claimed that year.
Early withdrawal: possible for DC/IRP, generally not for DB
DC and IRP allow early withdrawal for specific reasons before retirement, but DB in principle does not (though a loan against the DB balance may be possible). Only four reasons qualify, so needing cash alone is not enough.
| Reason | Requirement |
|---|---|
| Buying a home / jeonse deposit | Purchasing a home in your name, or funding a jeonse/key money deposit, while owning no home |
| Long-term medical care | 6+ months of care needed with medical costs exceeding 12.5% of annual wages |
| Personal rehabilitation / bankruptcy | Within 5 years of a rehabilitation proceeding or bankruptcy declaration |
| Natural disaster | Damage from a natural disaster |
If a DB participant needs cash, consider a loan secured by the pension instead of withdrawal, or check whether the employer’s interim severance settlement conditions (similar limited reasons to DC, such as buying a home or 6+ months of care) apply.
Changing jobs sends your severance to an IRP automatically
Since 2022, workers receiving severance pay are, in principle, first paid into their own IRP account before withdrawing as needed. Aside from a few exceptions (age 55+, severance of 3,000,000 KRW or less), the employer transfers the amount to the worker’s designated IRP instead of depositing it directly. The transferred amount has its retirement income tax deferred until withdrawal and can keep being invested inside the IRP, effectively functioning as a personal retirement asset account. Whether DB or DC, the final settlement flow at retirement passes through an IRP either way.
DB or DC — how to judge which suits you
There’s no single right answer — it depends on your expected wage growth trajectory and risk tolerance. In roles with steady, sizable raises and promotions, DB often wins out since it’s based on your average wage just before retirement — the higher your pay climbs, the larger the payout grows with it. Where wage growth is flatter or job changes are frequent, DC can be the better fit, letting you compound a fixed annual contribution yourself. Some employers let workers choose between DB and DC, or switch later — if you have that option, weigh your expected pay trajectory alongside your appetite for investment risk.
What happens if the company switches from DB to DC
With the consent of a majority of employees, a company can switch its retirement pension plan from DB to DC (or vice versa). When it does, the service period up to the switch is typically settled as of just before the change and transferred into the DC account, with the new plan’s rules applying to service afterward. Workers should confirm with HR exactly how the settlement was calculated and how much was transferred at the switch point.
Related guide
Since the IRP tax credit only shows up at year-end settlement, check how much comes out of your paycheck now with the net salary calculator, or preview your expected severance with the severance pay calculator. This guide reflects information as of 2026-07-19; credit limits and rates can change, so confirm specifics with the National Tax Service or a licensed tax accountant.