400 Trillion Retirement Pension Market 'Money Move'... Should You Switch to Financial Companies with Higher Returns? [Practical Financial Techniques]

Physical Transfer of Retirement Pensions to be Implemented by Month-End
Some Products May Not Allow Transfer Depending on Contract Type
Check Transfer Eligibility First
Financial Investment Firms Compete with Prize Events

The physical transfer service for retirement pensions will be implemented starting at the end of this month. A full-scale 'money move' is expected in the retirement pension market, which is approaching 400 trillion won. Hwang Seon-ah, Head of KB Securities Gold & Wise The First Center, said, "As the year-end approaches, interest in tax deductions has increased, along with a noticeable rise in inquiries related to the upcoming implementation of the physical transfer of retirement pensions."

The physical transfer service for retirement pensions allows retirement pension subscribers to switch their retirement pension providers without selling (cancelling) their existing investment products.

Until now, when transferring a retirement pension account to another provider, costs such as fees from early termination (including early termination interest rates) and losses due to changes in financial market conditions during the process of redeeming and repurchasing funds (opportunity costs) could occur. With the introduction of the physical transfer service, losses borne by subscribers during contract transfers will be minimized. Competition among providers is expected to lead to the launch of various services and improved returns.

To transfer a retirement pension account in the form of a physical transfer, the subscriber must open a retirement pension account with the new provider they wish to move to and then submit a transfer application. Upon receiving the transfer application, the retirement pension provider will inform the subscriber of important details such as the list of products eligible for physical transfer and confirm the subscriber’s final decision on whether to proceed with the transfer. The physical transfer will then be executed, and the results will be notified to the subscriber via SMS or mobile app. Eligible products for physical transfer include most major retirement pension products such as principal-guaranteed products under trust contracts like deposits, guaranteed interest insurance (GIC), equity-linked bonds (ELB), other derivative-linked bonds (DLB), as well as public funds and exchange-traded funds (ETF).

However, physical transfers are only possible within the same system type, such as Defined Benefit (DB), Defined Contribution (DC), or Individual Retirement Pension (IRP). Additionally, depending on the characteristics of the retirement pension investment products and contract types, physical transfers may not be possible, so subscribers must check whether their held products are eligible for physical transfer. Furthermore, even if the subscriber’s product is eligible, the provider to which they wish to transfer must also handle the same product for the physical transfer to be possible. Choi Jong-jin, Head of Mirae Asset Securities, said, "We expect the culture of investing pension assets through physical transfers to spread rapidly," adding, "Physical transfers will be a great opportunity to encourage long-term investment through global asset allocation."

Ahead of the service launch, financial and investment companies are running various promotional events. Hanwha Investment & Securities is conducting the 'Pension MoaMoa' event until December 31. This event targets customers who make net deposits into pension savings or IRP accounts. Hanwha Investment & Securities offers department store gift certificates worth up to 1 million won for net pension savings deposits of 3 million won or more, and up to 30,000 won for net IRP deposits of 3 million won or more. In addition, in anticipation of the 'retirement pension physical transfer system' implementation, customers who physically or cash-transfer 3 million won or more into retirement pension accounts (DC or IRP) will receive Starbucks coffee coupons. Shinhan Investment Corp. offers one-on-one customized consulting services through its nationwide network of 181 'Pension Leaders.' Customers who have or newly open an IRP account and pre-register physical transfer information will be entered into a draw to receive chicken coupons for 3,000 people. Major banks are also offering benefits. Woori Bank has launched the 'Woori Retirement Pension Physical Transfer is Better' event, giving away prizes worth up to 10 million won based on the amount of retirement pension physical transfers until the end of the year. Shinhan Bank provides Starbucks gifticons to the first 10,000 customers who newly open an individual IRP account and pre-register for physical transfers of assets held in other financial institutions’ IRP accounts. Among customers who complete IRP physical transfers, 1,000 will be selected by lottery to receive 10,000 won Shinsegae gift certificates.

Some financial companies will delay the retirement pension physical transfer service. Of the 44 providers eligible for physical transfer, 37 providers, accounting for 94.2% of total assets under management, are scheduled to start the service on the 31st of this month. Samsung Life Insurance, Hana Securities, Busan·Gyeongnam Bank, Gwangju·iM Bank, and iM Securities among seven providers will begin the service by April next year. Meanwhile, according to the Financial Supervisory Service, the domestic retirement pension assets under management reached 394.2832 trillion won in the second quarter of this year. By sector, banks held the largest share with 198 trillion won, followed by the financial investment sector including securities firms with 86.7 trillion won, life insurance with 78.4 trillion won, and non-life insurance with 14.8 trillion won.