[Exclusive] Government Plans to Expand Preferential Savings Deduction Benefits to Mid-sized Companies

Discussion on Additional Government Subsidies Beyond Corporate and Bank Support
Expanded Choices with Introduction of 3-Year and 7-Year Products

The government is pushing to expand the eligibility for the 'Preferential Savings Deduction for Employees of Small and Medium Enterprises (Preferential Savings Deduction)' to include medium-sized enterprises and significantly enhance the benefits.

According to the government on the 19th, the Ministry of SMEs and Startups and the Small and Medium Business Corporation are reviewing an improvement plan that includes this content to revitalize the Preferential Savings Deduction. A government official said, "We are discussing various measures to expand incentives for subscribers."

According to the improvement plan, the eligible companies for the Preferential Savings Deduction will be expanded from the current small enterprises to medium-sized enterprises. If this plan is implemented, the scope of eligible companies will be the same as that of the existing 'Tomorrow Filling Deduction.'

Under the Framework Act on Small and Medium Enterprises, companies with an average sales revenue of 150 billion KRW or less over three years in their main industry and total assets of less than 500 billion KRW regardless of industry are classified as small enterprises. Medium-sized enterprises refer to companies with assets of 500 billion KRW or more but less than 10 trillion KRW, representing a scale between small and large enterprises.

The product lineup is also expected to diversify. With the addition of short-term and long-term products to the existing 5-year single product, subscribers will have a wider range of choices. The government is planning and promoting a 3-year product with a shorter subscription period than the current 5-year product, and it is also known to be considering the introduction of a long-term 7-year product.

The government is also reportedly discussing providing additional benefits at the bank level for those who subscribe to the Preferential Savings Deduction in the future, including ▲bank point accumulation ▲low-interest loans dedicated to ventures and startups ▲sales-linked loans ▲financial and asset management support (customized credit loans for SME workers, preferential interest deposit products, etc.) in addition to the current preferential bank interest rate benefits.

In addition to support from companies and banks, a plan to additionally accumulate government subsidies is also being discussed. If government subsidies are introduced, priority support targets are expected to include ▲youth (early career workers) ▲parents during childcare periods ▲middle-aged individuals seeking reemployment.

The Preferential Savings Deduction is a public-private collaborative financial product introduced by the Ministry of SMEs and Startups in October last year to encourage long-term employment of SME employees, support asset formation, and promote workforce inflow into SMEs. If a subscriber deposits 500,000 KRW monthly for 5 years, totaling 30 million KRW, they can receive up to 40.27 million KRW at maturity through company subsidies and preferential bank interest rates.

This is equivalent to a savings product with an annual interest rate of 13.5%, yielding a maximum return of 34%, and attracted attention by reaching 30,000 subscribers within three months of launch.

This product is characterized as a complement to the existing 'Tomorrow Filling Deduction.' While the Tomorrow Filling Deduction requires companies to support twice the employee's contribution, the Preferential Savings Deduction significantly reduces the company's burden to about 20% of the contribution amount. Instead, it adds preferential bank interest benefits.

While the Tomorrow Filling Deduction targets key personnel of small and medium-sized enterprises, the Preferential Savings Deduction broadens the scope so that any employee working at an SME can subscribe.