‘Zero Commission’ Securities Firms Threaten to Poach Customers... Active IRP Recruitment Battle Among Banks

KB Kookmin, Shinhan, Hana, Woori, and Others Conducting IRP Events

[Asia Economy Reporter Park Sun-mi] As securities firms compete to attract individual retirement pension (IRP) customers by prominently offering 'zero fees,' banks are also actively engaged in defensive measures to prevent customer attrition by promoting various gift certificates and cashback events.

According to the financial industry on the 23rd, the four major commercial banks?KB Kookmin, Shinhan, Hana, and Woori?have recently launched events to secure IRP subscribers. Kookmin Bank is offering dessert set mobile coupons, chicken coupons, and more to ▲new IRP subscribers ▲customers who transferred pension savings or IRP accounts from other companies to Kookmin Bank IRP ▲customers who converted matured Individual Savings Account (ISA) funds into Kookmin Bank IRP deposits until the end of this month. Additionally, a raffle event is underway for customers who meet certain deposit reward conditions, with prizes such as stylers, wireless vacuum cleaners, and coffee machines.

Shinhan Bank is providing coffee gifticons and department store mobile gift certificates through a raffle to customers who newly open an individual IRP account and register automatic transfers of at least 100,000 KRW monthly or deposit more than 1 million KRW into their IRP accounts during the event period until the end of this month. Hana Bank is offering Hana Money, which can be used like cash, to a total of 1,500 customers through a raffle for those who newly subscribe to IRP via non-face-to-face channels such as internet banking or transfer contracts from other financial institutions until the end of this month. Woori Bank is giving away ice cream exchange coupons, air purifiers, and other prizes through a raffle to customers who newly subscribe to IRP with deposits of 100,000 KRW or more, register automatic transfers, or make additional deposits of 1 million KRW or more.

Individual IRP is a representative tax-saving product that offers tax deductions during year-end tax settlements. IRP provides tax deduction benefits of 16.5% or 13.2%, depending on the individual's income level, up to 7 million KRW (including the pension savings tax deduction limit). Since last year, subscribers aged 50 or older can receive tax deductions up to 9 million KRW (including a 6 million KRW pension savings tax deduction limit).

The IRP Market: Banks Hold a Large Share, but Securities Firms’ Moves Are Threatening

The active competition among banks to attract IRP customers is largely influenced by securities firms aggressively entering the IRP customer acquisition battle by eliminating management and asset management fees, which were previously charged at levels of 0.1% to 0.5%, amid abundant market liquidity and growing interest in retirement pensions.

This strategy aims to prevent existing customer attrition and secure new customers who might switch to securities firms. According to the Financial Supervisory Service, as of the end of the first quarter, banks hold 68.5% of IRP accumulated funds, while securities firms hold 23.6%, with banks significantly ahead. However, the year-on-year growth rate of accumulated funds in the first quarter was 39% for banks and 61% for securities firms, highlighting the aggressive customer acquisition by securities firms.

Riding the stock market boom, securities firms also lead banks in terms of returns, raising concerns that the IRP market, where banks currently hold a large share, could be overturned. According to statistics from the Banks’ Association, the IRP returns of the five major commercial banks in the first quarter of this year were Hana (6.07%), Shinhan (5.96%), Kookmin (5.77%), Woori (4.56%), and Nonghyup (3.86%). In contrast, the average IRP return of securities firms in the first quarter was 11.2%, with many firms recording double-digit returns, such as Shin Young Securities (27.39%), Yuanta Securities (13.41%), Korea Investment & Securities (12.49%), and Mirae Asset Securities (11.37%).

A representative from a commercial bank explained, "Although there is a shift in perception of retirement pensions from safe assets to investment assets, stability remains important, so simply subscribing to an IRP based on returns alone is not a good approach. It is better to join after reviewing post-management that manages the portfolio and ensuring the safety of investment destinations."