"Default Options Do Not Allow Retirement Pension Account Transfers" [Practical Financial Planning]

Stocks, REITs, and Other Non-Transferable Products Must Be Verified

The in-kind transfer system for retirement pensions will be implemented on October 15. Until now, to transfer a retirement pension account to another financial institution, all held investment products had to be sold or cashed out by waiting until maturity. This process incurred fees and the hassle of repurchasing each product one by one. Going forward, it will be possible to switch to another financial institution's account with the same products subscribed to without such inconveniences. However, caution is needed as transferring retirement pension accounts may not be possible depending on the product. We have gathered the necessary information for transferring retirement pension accounts.

Only some products like deposits and ETFs can be transferred... Increasing trend of securities firms for retirement pension accounts

First, in-kind transfers of retirement pensions are only possible between accounts under the same pension system. Defined Contribution (DC) plans can only be transferred to DC plans, and Individual Retirement Pensions (IRP) can only be changed to IRP accounts. Defined Benefit (DB) plans are excluded from the in-kind transfer system. However, if you want to move from a DC account to an IRP account, it can only be done within the same financial institution.

Not all products can be transferred. Only certain products are eligible for transfer. Deposits, government-guaranteed bonds (such as government bonds and monetary stabilization bonds), corporate bonds, principal-guaranteed derivative-linked bonds, funds (excluding MMFs), and Exchange-Traded Funds (ETFs) can be transferred between accounts. On the other hand, stocks, REITs, derivative-linked securities, interest rate-linked insurance, and default options cannot be transferred. Therefore, you should consider your retirement pension account transfer according to your portfolio.

According to the Financial Supervisory Service, as of the end of the second quarter, the accumulated retirement pension funds for DC, DB, and IRP amounted to KRW 394.2832 trillion. Among these, bank deposits accounted for KRW 207 trillion (52.5%), more than half. The amounts accumulated in securities firms (KRW 94 trillion) and life insurance companies (KRW 78 trillion) were 23.8% and 19.7%, respectively. A notable point is the growth rate of accumulated funds in the second quarter. The securities firms' accumulated funds grew by 3.7%, higher than banks' 2.4%. This is why the securities industry is competing in marketing ahead of the retirement pension transfer system.

ETFs gaining attention as a tool for retirement preparation beyond asset management... Fierce competition among securities firms to attract customers

Securities firms are focusing on ETFs. There is now a growing interest in products with higher returns than deposits or savings. According to data from the Korea Financial Investment Association, the ETF market size surged by 236.1%, from KRW 47 trillion in 2020 to KRW 158 trillion as of September 20, 2024. The reason the ETF market is expanding is that ETF investors are increasing across all generations.

According to Shinhan Investment Corp., over the past five years, the generation with the highest proportion of ETF holdings at Shinhan Investment Corp. was those in their 30s (27.5%). This means younger generations are more active in ETF investments than stocks. Especially, the proportion of ETF investors among those in their teens to 30s has been gradually increasing every year. Also, 87.2% of investors aged 10 to 30 who made their first ETF transaction also traded stocks, and they tended to invest more in U.S. market indices than domestic market indices.

For middle-aged and older investors, the scale of ETF investments was found to be large. Based on asset size, those in their 40s and 50s accounted for more than half (52.3%) of the total ETF investment assets.

Looking at the investment amount proportions by age group: teenagers accounted for 14.2%, people in their 20s 15.6%, 30s 11.6%, 40s 9.1%, 50s 5.9%, and those 60 and older 4.1%. Shinhan Investment Corp. analyzed, "Young customers in their teens to 30s seem to prefer ETF investments as they provide opportunities to access various assets with relatively small capital and serve as a simple and efficient investment tool."

This enthusiasm for ETF investment is expected to extend to retirement pension accounts, raising expectations within the securities industry. Although ETF trading is possible through bank accounts, real-time trading is difficult. To trade in real time, accounts must be transferred to securities firms. The securities industry has expressed its intention to actively attract customers with the implementation of the retirement pension in-kind transfer system.