BUSINESS

[PENSION TIPS] No pension refund for British nationals

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  • Published : Mar 30, 2010 - 15:10
  • Updated : Mar 30, 2010 - 15:10

This is the second of weekly columns provided by the National Pension Service to help foreign residents better deal with their pension plans in Korea. - Ed.

Q: As a British citizen working here, I have seen that at the end of my contractual period I will be unable to receive a lump-sum payment. As both my Korean employer and I will be making contributions with no benefit to either party, is there any way that I could opt out of paying any pension contributions?

A: British nationals working in Korea are not entitled to apply for a lump-sum refund of their pension contributions unlike their peers from the U.S., Canada or Australia. This disparity is caused by the nature of the social security agreement between Korea and Britain.
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The Korea-Britain agreement only stands to exempt detached workers from the duty of dual pension payment in the host country. For example, a Samsung employee, to be dispatched from Korea to an overseas branch office in Britain, will be relieved of his or her payment into the British pension fund, and vice versa.
Therefore, the contributions-only convention offers no practical merit to locally-hired or self-employed foreign nationals such as Britons working in Korea and Koreans working in Britain.
A more expansive, beneficial form of social security agreement, however, enables those who have a divided professional career from a multiple number of countries to totalize their payment history into a single payment of pension benefits. In most countries, at least 10 years of pension contribution is a minimum requirement to earn an old-age pension after retirement.
So, U.S. nationals, who have worked here three years for instance, can add their three-year coverage period from Korea to expand their pension benefits in the U.S. The case is the same with Koreans locally hired or self-employed in the U.S. However, most U.S. nationals opt to claim a lump-sum refund when they return home, while Koreans recoup their pension savings in the form of old-age benefits since the U.S. does not operate the lump-sum refund system.
Currently, Korea has formed a social security agreement with 16 different countries, among which eight countries -- Canada, the U.S., Germany, Hungary, France, Australia, Czech Republic and Ireland -- purport a totalization convention.
The benefit of a lump-sum refund aside, you cannot sever your NPS membership on your own initiative as long as you are engaged in gainful activities in Korea. Korean pension law states that anyone, including foreigners, aged between 18 and 59 working and residing in Korea is subject to the compulsory coverage of the National Pension Scheme.
In conclusion, British nationals may recoup their pension savings and some incurred interest, only after they reach 60 years of age. But if ever the two countries revise their agreement to totalize coverage periods, British nationals could immediately enjoy greater pension benefits from Korea. For more information, please visit www.nps.or.kr


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