Official Launch of the Fund-type Retirement Pension Advisory Group
Aimed at Improving Low Retirement Pension Returns
As the government actively pushes for improvements to the retirement pension system, it has officially launched the 'Advisory Group for the Introduction of Fund-type Retirement Pension System.' After discussing various issues and gathering opinions from stakeholders, the group plans to find a fund-type retirement pension model suitable for Korea and propose related legislation in the second half of the year.
On the 21st, the Ministry of Employment and Labor announced that the advisory group, composed of 11 experts, held its first meeting at the Seoul Biz Hub Center.
The advisory group consists of academic experts with expertise in various fields such as economics, business administration, social welfare, and law, as well as research institute experts reflecting the interests of different industries. At the kickoff meeting, they discussed issues including ▲appropriate fund-type forms and implementation stages by workplace size ▲the form and requirements of trustee corporations and whether for-profit corporations are allowed ▲fund licensing, management, and supervision.
The Ministry of Employment and Labor plans to examine various issues through the advisory group until June, then gather opinions from retirement pension providers, labor and management stakeholders, and propose related legislation.
Minister of Employment and Labor Kim Moon-soo stated, "This year marks the 20th anniversary of the introduction of retirement pensions, and the Ministry views it as a qualitative leap period for retirement pensions, making the introduction of fund-type retirement pensions a core task," adding, "Since discussions on pension structural reform need to take place, we will create a fund-type model that can successfully settle in Korea to strengthen the function of retirement pensions as old-age funds."
Korea's retirement pension system is mostly contract-type, where individual subscribers enter into contracts with private financial institutions as retirement pension providers and make their own investment decisions. As a result, rather than making rational investments aligned with pension assets, investments are concentrated in principal-guaranteed products such as savings and deposits, leading to relatively low returns.
In contrast, fund-type systems are common in advanced countries such as Australia and the United States. The fund-type structure involves a trustee institution managing and taking responsibility with expertise, prioritizing the interests of subscribers. This allows for investment asset allocation based on expertise and realization of economies of scale, which is advantageous for increasing returns.
The government plans to focus on designing a fund-type system suitable for Korea. It aims to increase on-site acceptance in the retirement pension market and ensure that real benefits return to companies and workers, thereby enhancing trust. It will also revisit issues raised during past government discussions on fund-type retirement pensions.
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