Less than 10 years of National Pension enrollment ‘Lump sum’ vs. ‘Discretionary continuation enrollment’?

In order to receive a national pension in old age, you must have paid at least 10 years of national pension contributions.
If you haven’t completed 10 years of National Insurance contributions by the time you reach the mandatory age of 60, you have two options: you can continue to contribute until you reach 10 years, or you can forgo your lifetime pension and receive a lump sum.
So, if you have less than 10 years of national pension contributions, what are the advantages of receiving a lump sum versus an annuity, and what should you keep in mind about each choice?

If you have less than 10 years of national pension, you can receive a lump sum after age 60

The age at which you can start receiving your pension depends on your year of birth.
For those born in 1969 or later, the age is 65; for those born in ’65 to ’68, the age is 64; for those born in ’61 to ’64, the age is 63; and for those born in ’57 to ’60, the age is 62.
However, all citizens are required to contribute to the national pension until the age of 60.
If you have less than 10 years of contributions as of the mandatory contribution deadline of age 60, you can receive a lump sum after age 60.
For example, if a person enrolled in the National Pension at the age of 55, he or she will not be able to receive a pension when he or she reaches the age of 60 because he or she has only 5 years of total contributions, which is less than the 10-year minimum.
Therefore, they are given the opportunity to collect their pension contributions plus interest as a lump sum, which is called a “return lump sum”.
You can also apply if you die, lose your nationality, or move out of the country.
You can apply in person at the National Pension Service, by mail, fax, or by phone if you call them.
In addition, if you have been a member of the National Pension for more than 10 years, you must receive it as a national pension.

Image source: National Pension Service

Choose your National Pension ‘Return Lump Sum’ carefully

Those who have not completed 10 years of membership and have reached the age of 60 will be contacted by the National Pension Service.
They will ask you if you want to receive a lump sum or extend your enrollment period to complete 10 years.
This is not an easy decision to make, as it depends on the amount of National Pension contributions you have paid and your life expectancy.
If your contribution period is too short (5 years or less) to benefit from extending your contribution period, it is better to choose the ‘return lump sum’ option, or the ‘voluntary continuation’ option if you only need to contribute for a few more years to receive a lifetime pension.
It’s important to note that if you choose “Return Lump Sum” because you’ve reached age 60, you won’t be able to apply for “Voluntary Continuation” again in the future.
(If you received a lump sum due to loss of nationality or moving out of the country, you can rejoin after your eligibility is restored.)

If you choose ‘Voluntary Continuation’, it is advantageous to only receive the lump sum for 10 years.

If you have less than 10 years of total national pension contributions after reaching the age of 60, you can apply for an extension from the age of 59.
If you have been enrolled in the National Pension since the age of 55 and have contributed for five years until the age of 60, you can continue to contribute until the age of 65 and receive a lifetime pension after completing 10 years.
In this case, you can also apply for a ‘return lump sum’ at any time, even before you reach the 10-year mark, if you need money in the meantime or decide that a lump sum is better than a lifetime allowance.
And if you want to increase the amount of money you receive each month, you can choose to continue contributing even after you’ve completed the 10-year minimum.
However, you’ll have to give up some of your monthly benefit, so it’s not a good idea unless you know you’re going to live a very long time.

Let’s compare the difference between 10 years of membership (at age 65) and 15 years of membership (at age 70) for a person who starts at age 55 and earns 3 million won per month.
(Assuming that the monthly pension premium remains the same at 270,000 won, or 9% of income)
Based on the National Pension Service’s “Estimated Pension Monthly Amount for Old-Age Pension” table, a 10-year member would receive KRW 299,000 per month, while a 15-year member would receive KRW 445,000 per month.
If you enroll for 5 more years, you will receive an additional pension of 146,000 won per month메이저놀이터,
Since you paid 270,000 won per month for 5 years, totaling 16.2 million won in pension insurance premiums, you will need to receive your national pension for at least 9 years and 3 months to get the value of the extra 5 years of pension.

[16.2 million won÷146,000 won=111 months (9 years and 3 months)].

There’s more. If you extend the voluntary enrollment period for another 5 years and take into account the 17.94 million won (299,000 won per month × 60 months) that you haven’t received, the number of months you need to receive the pension is 10 years and 3 months.

[17.94 million won÷146,000 won=123 months (10 years and 3 months)]

In the end, if you extend your enrollment period by 5 years based on the above criteria, you will receive a pension for at least 19 years and 6 months, which is a good choice.
Therefore, if you want to receive a lifetime pension by continuing to enroll in the National Pension due to the short enrollment period, it is advantageous to complete the minimum enrollment period of 10 years instead of forcing yourself to enroll for more than 10 years.

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