Yellow Umbrella Mutual Aid... Unclaimed Refunds Soar to 181.1 Billion Won as Business Closures Increase

Unclaimed Refunds of 181.1 Billion KRW Last Year... Eightfold Increase from Previous Year (23 Billion KRW)
Consecutive Self-Employed Business Closures Main Cause... 127,000 Decrease in One Year
Meanwhile, New Subscribers on the Rise... More Seeking Safety Nets Amid Unstable Reality

[Asia Economy Reporter Junhyung Lee] The unclaimed funds of the Yellow Umbrella Mutual Aid, known as the "retirement fund for self-employed workers," have increased eightfold. This is a result of the surge in closures of self-employed businesses struggling due to COVID-19. Considering that there is a system that allows deferral of contributions for a certain period after closure, it appears that many self-employed individuals who have not yet received refunds are aiming to restart their businesses. Perhaps reflecting this uncertain reality, new subscriptions to the mutual aid have shown an upward trend.

According to the Korea Federation of SMEs on the 16th, the unclaimed funds of the Yellow Umbrella Mutual Aid last year amounted to 181.1 billion KRW, about eight times higher than the previous year (23 billion KRW). In just one year, more than three times the unclaimed funds accumulated over five years since 2015 (55.8 billion KRW) were added. The closure mutual aid payments of the Yellow Umbrella Mutual Aid last year (728.3 billion KRW) also increased by more than 100 billion KRW compared to the previous year (614.2 billion KRW). This amount corresponds to one-quarter of the total closure mutual aid payments of 2.8949 trillion KRW paid to about 390,000 people over 13 years since the Yellow Umbrella Mutual Aid was launched in 2007.

The continuous closures of self-employed businesses have fueled the increase in unclaimed funds. Although there are various reasons for mutual aid payments such as closure, death, and retirement, over 95% of the refund reasons for the Yellow Umbrella Mutual Aid are due to closures. According to Statistics Korea, the number of self-employed nationwide last month was 5,335,000, a decrease of 127,000 compared to the same period last year (5,462,000). The Business Sentiment Index (BSI) is also at its worst. The BSI for small business owners compiled by the Small Enterprise and Market Service last month was 35.8. A BSI below 100 means more people believe the economy has worsened. It has declined for two consecutive months since the operating hour restrictions began in November last year.

On the 27th, as stringent social distancing measures to prevent the spread of the novel coronavirus infection (COVID-19) continue, a store located in the commercial area in front of Ewha Womans University in Seodaemun-gu, Seoul, has closed down and posted a notice for lease inquiries. The photo is unrelated to specific expressions in the article. Photo by Jinhyung Kang aymsdream@

However, the sharp increase in unclaimed funds also means that a considerable number of self-employed individuals are aiming to restart their businesses. The Yellow Umbrella Mutual Aid has a "contribution aggregation system." This system allows contracts to be maintained for up to one year and six months even after closure. It can be interpreted that even if they close their business, they do not immediately withdraw their contributed mutual aid funds to maximize benefits.

New subscriptions have rather turned upward. The Korea Federation of SMEs explains that this is due to more people turning to the Yellow Umbrella Mutual Aid, which serves as a safety net for small business owners amid uncertain realities. Last year, there were 274,094 new subscribers, an increase of 36,927 compared to the previous year (237,167). In 2019, new subscriptions had declined by 34,616 compared to the previous year (271,783). On the online cafe for self-employed workers with over 650,000 members called "Apeunikka Sajangida" (Because It Hurts, You're the Boss), posts inquiring about mutual aid subscriptions have been continuously posted.

Meanwhile, the Korea Federation of SMEs plans to establish a dedicated team this year to assist in receiving unpaid mutual aid funds. The call center staff increased from only three in 2018 to 15 within three years. A representative from the Federation said, "We check the closure status of subscribers every month and provide guidance on receiving mutual aid about four times per closed subscriber via mail and phone," adding, "The receipt rate within four years for closed subscribers reaches 98%."