[Become an Insurance Insider] Is There a Savings Insurance That Returns 4 Million Won in Year-End Tax Settlement?

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[Asia Economy Reporter Oh Hyung-gil] Interest in pension savings insurance, a useful financial product for creating a '13th-month salary,' is increasing.

With an annual payment of 4 million KRW, a tax credit of up to 660,000 KRW is possible, and it offers a higher declared interest rate compared to other insurance products, enabling preparation for retirement funds.

According to the insurance industry on the 6th, interest in tax credit benefits using pension savings insurance has recently increased. It is considered a product to prepare for year-end tax settlement as it offers the highest tax credit among not only insurance but all financial products.

Consumers with an annual earned income of 55 million KRW or less receive a tax credit rate of 16.5% (including local income tax). For consumers with an annual earned income above 55 million KRW, a tax credit rate of 13.2% applies. The maximum refund limit is 4 million KRW.

DC (Defined Contribution) type retirement pension subscribers can increase their tax credit amount up to 7 million KRW annually by making additional contributions. DB (Defined Benefit) type retirement pension subscribers can expand the deduction scope by opening an additional IRP account.

However, due to the large scale of tax credits, there are many points to consider before subscribing.

If the subscriber is aged 55 or older and receives the pension annually in installments, they must pay pension income tax ranging from 3.3% to 5.5% depending on the age group. Considering the age at which the pension is paid, it is likely that there will be no earned income, so paying separate taxes is a disadvantage.

Additionally, if you have subscribed to protection insurance, you can receive tax credits. If you have subscribed to whole life insurance or protection insurance under the Income Tax Act, you can receive a tax credit of 13.2% (including local income tax) on insurance premiums through year-end tax settlement. The maximum limit is 1 million KRW. For disability-exclusive protection insurance premiums, a 15% tax credit is available.

If you have a dependent family member with virtually no income earning less than 1 million KRW annually, the working income earner supporting them can receive deduction benefits if certain conditions are met.

Also, from this year's year-end tax settlement, the deduction of actual medical insurance payments from the receipt of indemnity medical insurance benefits is a point to be cautious about when preparing for year-end tax settlement. If you receive indemnity insurance benefits in the year you incurred medical expenses, you can deduct the received amount accordingly, but if you claim the insurance benefits later, the calculation becomes complicated.