Last Year's Target Return Greatly Exceeded
First Annual Report Since Full Implementation in July
41 Financial Institutions' Reserves Surpass 12 Trillion Won
Last year, when the default option (pre-designated management system) for retirement pensions became mandatory, the overall return rate of default option products exceeded 10%. This performance significantly surpassed the initial target return rate of 6-8% per year.
On the 5th, the Ministry of Employment and Labor announced that as of the end of the fourth quarter last year, the cumulative reserve amount of 300 default option products sold by 41 financial institutions reached 12.552 trillion won, surpassing 12 trillion won. This represents a substantial increase of about 7.4425 trillion won compared to the previous quarter. The number of subscribers was 4.79 million (as of the end of the fourth quarter), an increase of 880,000 compared to the third quarter.
It was found that 11.2879 trillion won, accounting for 90% of the total reserve amount, was managed in ultra-low-risk products such as fixed deposits, while low-risk products accounted for 683.5 billion won (5.4%), and medium-risk and high-risk products were 405.7 billion won (3.2%) and 174.9 billion won (1.4%), respectively. Since last year was the first year of implementing the default option, many subscribers chose relatively safe investment methods.
According to the Ministry of Employment and Labor's statistics, the annual return rate of default option products managed by financial institutions such as securities companies and banks last year reached approximately 10.1%. This greatly exceeded the initial target return rate of 6-8% per year.
The one-year return rates by investment risk grade were 4.56% for ultra-low risk, 7.69% for low risk, and 10.91% and 14.22% for medium and high risk, respectively, showing higher returns with higher risk levels.
The Ministry of Employment and Labor analyzed, "Despite the unstable financial market conditions last year, the pre-designated management system drove the increase in return rates." The Ministry of Employment and Labor and the Financial Supervisory Service disclose key information about default option products quarterly, and the disclosure materials can be accessed through the Ministry of Employment and Labor website and the Financial Supervisory Service's integrated pension portal.
The retirement pension pre-designated management system, where financial institutions manage the reserve funds on behalf of subscribers according to a pre-designated method, was fully implemented from July 12 last year after a one-year grace period. It was introduced to prevent retirement pensions from being left in low-interest products such as deposits and to improve return rates.
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