Abstract

Recently introduced and not actively utilized, retirement pension plan is analyzed diversely from perspective of tax savings in this study. The result of this study shows that optimal choice between the defined benefit (DB) and the defined contribution (DC) pension plan is determined by taxpayers’ average wage growth rate and management company’s average earning rate. Furthermore, retired taxpayers’ optimal choice between lump－sum payment and pension payment is determined by payment period and marginal tax rates. Based on those analyses, this study suggests practical plans to revise tax laws to effectively implement retirement pension plan as below. First, as retirement pension is the deferral of past labor incomes, tax benefits for retirement pension plan should be as much as those for labor incomes including increase in deduction and separate taxation. Second, taxpayers’s choice for retirement pension plan should be enlarged including mixed entry and type conversion, and IRA scheme should be more actively informed for interim lump－sum payment not to be wasted. Finally, for retirement pension plan’s early settlement, deduction for retirement allowances and regulations for asset management company should be abandoned.

Keywords

• Retirement pension plan
• Defined benefit
• Defined contribution
• Optimal choice

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