[2023 Gold Age Forum]② Importance of Financial Assets After Retirement... The Urgency of the 'Three-Tier Pension'

Jinwoong Kim, Head of NH Investment & Securities 100-Year Life Research Institute
Low Growth, Low Interest Rates, Aging... "Need for Quasi-Public Pensionization of Retirement Pensions"

Jinwoong Kim, Head of the 100-Year Life Research Institute at NH Investment & Securities, is giving a lecture on the topic of "Asset Management Strategies for the 100-Year Life Era According to Demographic Changes" at the '2023 Asia Economy Gold Age Forum' held at the Bankers Hall in Jung-gu, Seoul on the 19th. Photo by Hyunmin Kim kimhyun81@

Jinwoong Kim, Head of the 100-Year Life Research Institute at NH Investment & Securities, emphasized that “financial assets that generate cash flow after retirement are the most important” as a strategy for asset management in the 100-year era due to demographic changes. This was stated at the '2023 Asia Economy Gold Age Forum' held on the 19th at the International Conference Room of the Bankers' Hall in Jung-gu, Seoul. He mentioned that pensions are the most important financial asset.

The reason why quasi-mandatory pensionization of retirement pensions is necessary stems from demographic changes. Kim said, "As of 2023, the elderly population aged 65 and over accounts for 18.4% of the total population, but it will increase to 41% by 2053," adding, "We need to consider super-aging and asset management environments, and ultimately, due to demographic changes, low interest rates are inevitable." He identified low growth, low interest rates, and aging as the three key keywords of demographic change.

Kim explained that two things must be considered when preparing for retirement: the stability of retirement income and the sufficiency of retirement assets. He said, "If there is a regular monthly income even after retirement, there would be no worries, but since that is not the case, asset management is necessary," and added, "Even if you have assets, you need to check whether they are sufficient."

According to last year's Statistics Korea survey, only 2.5% of retired household heads aged 60 and over responded that their living expenses were 'more than sufficient.' Those who answered 'sufficient' accounted for 8.1%. Meanwhile, 39.3% said 'insufficient,' 17% said 'very insufficient,' and 33.1% said 'average.'

He mentioned that pensions are the most important among financial assets. According to last year's Statistics Korea survey, among those who said their retirement living expenses were 'more than sufficient,' 41% covered them with public pensions such as the National Pension, and 28.5% covered them with private pensions such as personal savings. Kim said, "We need to consider that private pensions are important next to public pensions."

Nevertheless, he pointed out that the average asset composition of households in Korea is skewed. According to last year's Statistics Korea survey, the average asset composition of Korean households consists of 73.7% real estate, while financial assets account for only 15.6%. For households aged 60 and over, the average asset composition is 79.7% real estate and only 13.9% financial assets.

Looking ahead at demographic changes, an important point is the 'era of aging together with children.' This means that both children and parents will be in a structure where they live retirement lives together. Therefore, since preparing with pension assets is necessary to ensure a stable old age, some degree of compulsion is needed.

According to the '2022 Middle-Class Report' conducted by the 100-Year Life Research Institute at NH Investment & Securities, the expected monthly public pension amount is highest for public officials at 1.91 million KRW. Next are office workers at 1.28 million KRW and self-employed at 960,000 KRW. Hence, the necessity of compulsory retirement preparation must be considered. Kim emphasized, "Quasi-mandatory pensionization of retirement pensions is necessary, and furthermore, preparation should be made by building a pyramid of the 1st layer National Pension, 2nd layer quasi-mandatory retirement pension, and 3rd layer private pension."