ALERT / SEPTEMBER 30, 2025
South Korea to increase National Pension Service contribution rates
South Korea recently enacted reforms to the National Pension Service (NPS), its mandatory social insurance pension system. Key changes include gradual increases in mandatory contribution rates for both employers and employees from 4.5% each (a total of 9.0%) to 6.5% each (a total of 13.0%) and increases in contribution credits for childbirth and military service.
The reforms will take effect from 1 January 2026, with the gradual increases in mandatory contribution rates set to take place annually from 1 January 2026 to 1 January 2033.
Background
The reforms to the National Pension Act were approved by the South Korean parliament on 20 March 2025 and published in the Government Gazette on 2 April 2025. The reforms are intended to prolong the solvency of the NPS fund, improve pension adequacy for retirees, and respond to demographic pressures from South Korea’s aging population.
The NPS is South Korea’s mandatory social insurance pension system, which began operations in 1988. It covers employed and self‐employed persons, with compulsory participation for those aged 18 to under 60. Contributions are shared equally by employers and employees. The NPS provides old-age, disability, survivor, and social assistance benefits.
Key details
The most relevant details for employers to note include the following:
Increases in mandatory employer and employee contributions
The total rate of mandatory NPS contributions, which is split equally between employer and employee, is currently 9.0%. This will increase by 0.5% per year starting in 2026, to reach 13.0% in 2033, as follows:
Effective date of change | New total contribution rate | New employer contribution rate | New employee contribution rate |
1 January 2026 | 9.50% | 4.75% | 4.75% |
1 January 2027 | 10.00% | 5.00% | 5.00% |
1 January 2028 | 10.50% | 5.25% | 5.25% |
1 January 2029 | 11.00% | 5.50% | 5.50% |
1 January 2030 | 11.50% | 5.75% | 5.75% |
1 January 2031 | 12.00% | 6.00% | 6.00% |
1 January 2032 | 12.50% | 6.25% | 6.25% |
1 January 2033 | 13.00% | 6.50% | 6.50% |
Increase in contribution credits for childbirth
Childbirth contribution credits are additional periods granted to female contributors when they give birth. These credited periods are added to the total insured period used to determine pension eligibility and benefit amounts.
Currently, childbirth contribution credits are granted to female contributors who have given birth to two or more children. Female contributors receive 12 months of contribution credits upon the birth of their second child and 18 months of contribution credits for the birth of each subsequent child, capped at a total of 50 months.
However, from 1 January 2026, female contributors will start receiving 12 months of contribution credits upon the birth of their first child, 12 months of contribution credits upon the birth of their second child, and 18 months of contribution credits for the birth of each subsequent child. Additionally, the cap of 50 months will be entirely abolished from 1 January 2026.
Increase in contribution credits for military service
Military service contribution credits are additional periods granted to male contributors for time spent in national military service. These credited periods are added to the total insured period used to calculate pension eligibility and benefit amounts.
From 1 January 2026, contribution credits for military service will increase from a maximum of six months to twelve months.
Employer action: ACT
Employers should review and update their internal policies, practices and systems, employment agreements and collective agreements, where necessary, to reflect the upcoming changes.
Particularly, employers should prepare for the phased changes in both employer and employee contribution rates starting 1 January 2026 by budgeting for the increased costs, coordinating with payroll providers to gather necessary information, and ensuring payroll systems and timelines are ready for implementation. Regular reviews should be conducted to ensure ongoing compliance with the scheduled increases in contribution rates. Employers may also wish to educate employees on the upcoming changes and how they will affect their retirement benefits.
Please contact Eunha Park, General Manager of People Solutions, Lockton South Korea at eunha.park@lockton.com (opens a new window) and Ty Thurmond, VP, Senior Consultant, Global People Solutions at ty.thurmond@lockton.com (opens a new window), or your Lockton Consultant, if you wish to discuss these changes or the potential impact on the retirement benefits, financial planning, and financial education currently offered to your employees.
Further Information
