Ruling and Opposition Parties Approve Introduction of Retirement Pension 'Default Option'... Passed Subcommittee of National Assembly Environment and Labor Committee

[Asia Economy Reporter Jang Sehee]The amendment to the Employee Retirement Benefit Security Act (근퇴법) introducing the default option (pre-designated operation system) to increase the return on retirement pensions passed the subcommittee of the National Assembly's Environment and Labor Committee on the 1st.

The Environment and Labor Committee held a subcommittee on employment and labor bills that day and unanimously approved the introduction of the default option to defined contribution (DC) type retirement pensions as part of institutional improvements in the retirement pension market.

The default option is a system that sets a kind of default method so that if the subscriber does not separately designate how to operate the accumulated funds, a specific method is automatically applied.

Currently, unlike the defined benefit (DB) type, DC-type retirement pensions allow subscribers, who are workers, to directly manage funds through funds or exchange-traded funds (ETF).

However, the majority of subscribers prefer safe management and leave their pensions in principal-guaranteed products with low returns such as savings and deposits.

Accordingly, the basic purpose of the amendment is to increase pension returns by including performance-based products in the composition of the default option.

Meanwhile, it is expected to pass the plenary session, the Judiciary Committee, and the plenary session of the National Assembly within this month.