[Real Estate Tech] '1%P Difference' Retirement Pension Fund Snowballs... Last Year's 'Top Performer' Is

Mirae Asset, Hana Securities, Lotte Non-Life, and IBK Pension Insurance Included Among Non-Guaranteed Excellent Groups
"More Options... Advising to Review Product Groups"

If you are an investor considering 'switching retirement pensions' next month, it is worth referring to the Ministry of Employment and Labor's evaluation of retirement pension providers. The ministry selects companies with excellent average return performance based on quantitative criteria such as 1-year, 3-year, 5-year, and 10-year returns.

According to the Ministry of Employment and Labor's '2023 Excellent Retirement Pension Providers' data, as of 2023, the companies with the highest returns for non-principal-guaranteed products are Lotte Insurance, Mirae Asset Securities, Hana Securities, and IBK Pension Insurance. For principal-guaranteed products, the top companies are Lotte Insurance, IBK Pension Insurance, and KB Securities.

In fact, comparing mid- to long-term returns through the Financial Supervisory Service's retirement pension comparison disclosure, the 10-year average annual return for defined contribution (DC) products based on non-principal-guaranteed funds is highest at Hana Securities with 4.02%, followed by Mirae Asset (3.22%), IBK Pension Insurance (3.17%), and Lotte Insurance (2.74%). In the individual retirement pension (IRP) product category, IBK Pension Insurance leads with a 10-year return of 3.19%, followed by Mirae Asset Securities (3.14%), Lotte Insurance (2.79%), and Hana Securities (2.16%).

When looking at a shorter period of the most recent 1 year as of the end of last year, Mirae Asset Securities had the highest return at 14.90%, followed by Hana Securities (14.46%), IBK Pension Insurance (14.04%), and Lotte Insurance (8.01%). This reflects last year's stock market boom. A representative from the Financial Supervisory Service's Pension Supervision Office explained, "Because last year's market conditions were favorable, the 1-year short-term returns surpassed the long-term returns," adding, "Mid- to long-term returns are calculated based on geometric averages."

Comparing returns in the retirement pension market is important because even a 1 percentage point difference can accumulate into a significant gap. Kim Dong-yeop, head of the Mirae Asset Retirement Research Center, explained, "It's easy to compare when you think about the 'Rule of 72,' which refers to the time it takes for your money to double," adding, "Especially in today's low-interest-rate environment, the difference between 2% and 3% is much larger than the difference between 10% and 11%."

The Rule of 72 is a formula used to calculate how long it takes for an asset to double. Dividing 72 by the interest rate gives the period required for the principal to double. For example, at an annual return rate of 2%, it takes 36 years, but at 3%, it shortens significantly to 24 years. When compounded interest is added?where principal and interest are combined and reflected as '1+a' each year?the difference grows exponentially.

From an individual subscriber's perspective, it is pointed out that examining product categories is more important than average provider returns. Moving to a provider that offers a wider range of products not available in the current DC or IRP comprehensive account lineup can increase options. Especially, there is expected to be high demand for in-kind transfers among retirement pension subscribers holding products that inevitably suffered investment losses when the in-kind transfer system was absent, such as fixed deposits and overseas funds. Retirement pension products can be found on each company's website. However, some products cannot be transferred in-kind, so it is necessary to check this in advance. Non-transferable products include repurchase agreements (RP), equity securities, derivative-linked securities, default options, and private bonds.

With growing expectations for a large-scale 'money move,' participating in financial industry in-kind transfer events can also offer additional benefits. Securities firms are conducting aggressive marketing ahead of the system implementation. Unlike banks and insurance companies, which mainly offer principal-guaranteed products, securities firms have a variety of product categories. Mirae Asset Securities, Korea Investment & Securities, and Samsung Securities are running events that provide prizes to customers who transfer their accounts.

Center Director Kim Dong-yeop noted, "Deposits had mismatched maturities and DC product transfer timings, causing inevitable losses when changing providers, and overseas funds also had concerns about disadvantages due to long redemption periods," adding, "I expect active in-kind transfers mainly among moderate investors who combine fixed deposits with stock and fund investments, rather than investors who strictly pursue safe returns."