[2020 Gold Age] "The Only Retirement Plan for Office Workers is the 3rd Pillar Pension"

Kim Tae-woo, a Certified Financial Planner at Hanwha Life, is giving a presentation on "(Super) Aged Society, Retirement (Pension) Planning in an Era of Uncertainty" 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 Kim Min-young] “For wage earners without inherited assets from their parents, the only way to prepare for retirement is the three-tier pension system.”

Kim Tae-woo, a Certified Financial Planner (CFP) at Hanwha Life Insurance, introduced the three-tier pension as a method for retirement planning at the ‘2020 Gold Age Forum’ held on the 9th at the Bank Federation Building in Jung-gu, Seoul.

Kim CFP first explained the changes in South Korea’s economic environment and longevity risk. He stated, “South Korea officially entered an aged society in 2018 due to the aging of the baby boomer generation and the lowest birthrate among OECD countries. Economic slowdown and declining potential growth rates are leading to fewer opportunities to accumulate assets for retirement.” As of this year, the elderly population ratio in South Korea has reached 15.7%. At this pace, it is expected to become a super-aged society around 2028, eight years from now.

Until the 1980s, when bank interest rates exceeded 20%, the phrase ‘save money to become rich’ was common, but in today’s ultra-low interest rate era, wage earners have few ways to accumulate assets. He said, “According to surveys, the average monthly net profit of self-employed individuals and the average income of those over 60 are only 1.87 million won and 1.35 million won, respectively. While rental income from real estate would be ideal, it is a dream for most wage earners.”

Kim Tae-woo, an internationally certified financial planner at Hanwha Life, is giving a presentation on "(Super) Aged Society, Retirement (Pension) Planning in an Era of Uncertainty" at the 2020 Gold Age Forum held on the 9th at the Bankers Hall in Jung-gu, Seoul. Photo by Moon Ho-nam munonam@

He said the realistic and almost only method is the three-tier pension system. The three-tier pension refers to the public pension (National Pension), retirement pensions (or Individual Retirement Pensions, IRP) obtained while working at a company, and private pensions such as pension insurance, pension savings, and pension funds.

He emphasized designing retirement and private pensions as fixed-term rather than lifelong. Kim CFP said, “The average severance pay for those over 50 is 26.5 million won, and for those over 60, it is only 10 million won, which is too low. As of 2018, the average monthly pension receipt amount for the elderly, including public and private pensions, is only 570,000 won, which is very low.” He advised, “It is necessary to adjust the pension receipt period and medical expense coverage period considering seniors’ lifestyles.”

Specifically, “Most elderly in South Korea start experiencing health issues after age 70 and pass away around age 88, so pensions should be designed to be received most between ages 65 and 75,” he said. “Since the National Pension is lifelong, it is better to receive retirement and private pensions as a 10-year fixed term (from 65 to 75).” As of last year, the pension market size reached 1,309 trillion won, with the National Pension accounting for about 763 trillion won, private pensions 376 trillion won, and retirement pensions 195 trillion won.