[1mm Financial Talk] "I'm Number 1" The Late-Blooming Retirement Pension Battle... Why?

Amid Year-End Tax Settlement Season, Banks Compete to Attract New IRP Customers
Funds Flow to Securities Firms After Retirement Pension Switching Implementation

It has been three months since the implementation of retirement pension switching. Recently, a fierce marketing battle over retirement pensions has erupted belatedly. Banks are claiming to be 'number one' by presenting favorable indicators, igniting an unexpected retirement pension war, drawing attention to the background behind it.

According to the financial sector on the 23rd, Hana Bank, Shinhan Bank, and KB Kookmin Bank each claimed to be number one in retirement pensions, solidifying their 'number one image.' It may seem like a tie for first place, but looking into the details reveals the following. Hana Bank boasted the largest increase in retirement pension reserves, with an increase of about 6.6 trillion KRW from the end of 2023 to the end of 2024. Additionally, Hana Bank emphasized that its individual retirement pension (IRP) and defined contribution (DC) principal-guarantee-free product operating yields were the highest among banks.

Shinhan Bank announced that its IRP net increase in 2024 was 3.03 trillion KRW, the highest among banks, claiming the 'number one IRP net increase.' KB Kookmin Bank achieved the largest cumulative retirement pension reserves in both DC and IRP. As of the fourth quarter of 2024, KB Kookmin Bank's combined DC and IRP reserves amounted to 29.9116 trillion KRW. While each bank based their claims on favorable indicators, none of the statements are incorrect upon closer examination.

The background behind the belated outbreak of the retirement pension war is analyzed to be due to the year-end tax settlement season and the actual outflow to securities firms following the retirement pension switching, prompting efforts to 'protect the home base.'

The fourth quarter is typically the period with the highest number of IRP account openings, making it a fiercely competitive time for banks to attract new customers. This is due to the year-end tax deduction. It is the only item in the year-end tax settlement that allows for a 'last-minute' deduction, where tax credits can be received even with a one-time payment by the end of the year without continuous contributions. Combining pension savings and IRP, tax credits can be claimed up to an annual limit of 9 million KRW. If earned income is 55 million KRW (comprehensive income 45 million KRW) or less, 16.5% of the contribution amount is multiplied, and if higher, 13.2% is multiplied, and the corresponding amount is refunded during the year-end tax settlement. When the tax credit limit is fully utilized, those with earned income of 55 million KRW or less (comprehensive income 45 million KRW) receive a refund of 1,485,000 KRW, and those above receive 1,188,000 KRW.

Following the implementation of retirement pension switching, a large amount of funds flowed into securities firms, leading to analysis that banks are trying to prevent customer attrition. In fact, since the retirement pension switching was implemented last October, securities firms have absorbed about 1 trillion KRW from other operators. Mirae Asset Securities, Korea Investment & Securities, and Samsung Securities alone absorbed 800 billion KRW in retirement pension funds from other operators. Especially, Mirae Asset Securities saw the largest increase in reserves across all sectors in DC and IRP. In 2024, Mirae Asset Securities' IRP and DC reserves increased by 2.2976 trillion KRW and 2.74 trillion KRW, respectively. According to the Financial Supervisory Service, as of the end of December 2024, the largest total retirement pension reserves were held by Samsung Life Insurance (50.3264 trillion KRW), followed by Shinhan Bank (45.9153 trillion KRW), KB Kookmin Bank (42.0481 trillion KRW), and Hana Bank (40.2734 trillion KRW). Mirae Asset Securities (29.1945 trillion KRW) surpassed IBK Industrial Bank (28.3763 trillion KRW) to take fifth place.

A representative from a major commercial bank said, "With aging and early retirement, customers' interest in retirement pensions is increasing, and the retirement pension market is growing, creating an atmosphere across the entire financial sector to 'catch both the wild rabbit and protect the home rabbit.' To this end, financial companies are focusing their capabilities by establishing independent pension departments through large-scale organizational restructuring before and after actual transfers and increasing personnel."