[2020 Gold Age] Jeon Yong-woo, Team Leader at Samsung Asset Management, "Maximize Pension Savings Through Retirement and Personal Pensions"

Jeon Yong-woo, Head of Pension Marketing Team at Samsung Asset Management, is giving a presentation on the topic "Living on a Monthly Salary After Retirement with Pension Assets" at the 2020 Gold Age Forum held on the 9th at the Bankers Hall in Jung-gu, Seoul. Photo by Moon Ho-nam munonam@

[Asia Economy Reporter Eunmo Koo] “As average life expectancy increases and concerns about retirement preparation deepen, more people are trying to use pensions for their post-retirement livelihood. While voluntary subscription to the National Pension is basic, additional contributions to the Individual Retirement Pension (IRP) have now become a trend.”

On the 9th, Jeon Yong-woo, team leader of the Pension Marketing Team at Samsung Asset Management, explained at the '2020 Gold Age Forum' hosted by Asia Economy at the Bankers Hall in Jung-gu, Seoul, that it is important to accumulate as much pension as possible through retirement pensions and personal pensions for a prosperous and comfortable retirement life.

Team Leader Jeon said, “The biggest difficulty in preparing for retirement is that the initial goal is too big, so people give up,” adding, “If you use the retirement pension paid by the company according to the salary level along with the IRP, preparing for retirement will not be as difficult as you think.” The IRP is a system that allows workers to accumulate severance pay received upon job change or retirement in an account under their own name and convert it into a pension after the age of 55. Like a pension savings account, workers can additionally deposit money themselves to prepare for retirement.

Team Leader Jeon said, “The number of people making additional contributions through personal IRP is steadily increasing,” and “especially, personal IRPs have a relatively high proportion of performance-based dividend investments.” According to the Ministry of Employment and Labor, the personal IRP reserves, which were about 15.3 trillion won in 2017, increased to 19.2 trillion won in 2018 and reached about 25.4 trillion won last year. The proportion of performance-based dividends, which was 21.8% in 2017, also expanded to 25.5% last year.

Team Leader Jeon emphasized that additional contributions to IRP can also provide tax credit and tax-saving effects. Currently, IRP allows additional contributions up to 18 million won annually at the individual's expense, with tax credit benefits up to 7 million won per year and tax deferral until the pension start date.

Team Leader Jeon presented two key methods for building pension assets: long-term investment and diversification. He first emphasized, “When investing 100 million won, the difference between 1% and 5% annual returns results in a 300 million won difference after 30 years,” and stressed that “small differences in returns lead to significant differences in the long term and determine the quality of life after retirement.”

In fact, in the domestic stock market, the probability of loss decreases as the investment period lengthens. According to data analyzed by Samsung Asset Management using the KOSPI TR index from 1980 to last year, the probability of loss was 48.7% if invested for just one day at any point, but it decreased to 13.1% for a 10-year investment period and 0.0% for 20 years.

He advised investors to be cautious about not enduring market fluctuations or hastily deciding to redeem due to short-term returns. Team Leader Jeon said, “For this reason, even in the US Magellan Fund, which recorded an average annual return of 29% over the past 13 years, more than half of the investors experienced losses,” and added, “In domestic fund investments, since 2003, the customer return rate (6.0%) is 2.2% lower than the domestic fund return rate (8.2%), which implies the importance of long-term investment.”

He also emphasized the importance of reducing investment risk through diversification. Team Leader Jeon explained, “Rather than chasing ‘hot’ products each year, you should invest by dividing among various stocks,” and “although asset returns fluctuate depending on timing, diversification allows you to secure steady and stable returns.” In fact, since 2012, the average return of the top individual net purchase stocks in the domestic KOSPI market each year was only -28.7%.