retirement pensions, USA News: The government is pursuing mandatory external accumulation of retirement pensions across all workplaces, expanding fund-type systems, and raising the investment limit for risky assets. While the intent is to improve returns by changing an operating structure heavily skewed toward principal-guaranteed products now that accumulated reserves have exceeded 500 trillion won, losses stemming from market volatility and issues regarding fiduciary responsibility remain as challenges.
At the end of last year, retirement pension reserves were recorded at 501.4 trillion won. This represents a 16.1% increase from the previous year, marking an entry into the 500 trillion won range just one year after surpassing 400 trillion won in 2024. Although retirement pensions are a system that, alongside the National Pension Service, supports old-age income, the long-term average annual return has remained in the 2% range. Last year, boosted by a bull market, it recorded a return of 6.5%, hitting an all-time high; however, criticism has persisted that asset growth effects are limited as a significant portion of reserves remains in cash-like assets and principal-guaranteed products. The adoption rate of retirement pensions by workplaces has stalled at 26.5% over the past 10 years, and the employee subscription rate has remained in the 50% range since 2017. Intermediate withdrawals for reasons such as home purchases are also cited as factors weakening the system's function as old-age income.
On October 29, 2026, the Ministry of Employment and Labor announced a plan to strengthen retirement pension functions in conjunction with relevant ministries. The core content is to make external accumulation of retirement benefits mandatory for all workplaces by 2030 and to induce long-term accumulation and pension receipt. External accumulation is a method where employers entrust retirement benefit funds to an external financial institution, lowering the risk of benefits not being paid due to business management deterioration or closure. In 2025, retirement benefits accounted for 41.1% of unpaid wages, amounting to 822.9 billion won. Alongside this, the government is pushing for retirement pension-backed loan products to reduce the need for intermediate withdrawals for urgent funding needs.
Fund-Type Systems and Professional Management
The fund-type retirement pension is a structure where reserves from multiple workplaces are pooled and managed by a professional management institution. Unlike the contract type where subscribers choose products directly, professional management entities can handle asset allocation and investment decisions, increasing long-term operational efficiency. The government plans to categorize and activate the fund type into financial institution open-type, union-type, and public institution open-type. "Pureun Seed," a retirement pension fund for small and medium-sized enterprises, recorded annual returns of 6.97% in 2023, 6.52% in 2024, and 8.67% in 2025, outperforming the retirement pension average while maintaining the principle of investing more than 70% in safe assets such as bonds.
Balancing Stability and Profitability
The government is reviewing a plan to gradually raise the investment limit for risky assets in contract-type retirement pensions, which is currently capped at 70%. The decision is based on the judgment that while risky assets like equity funds can suffer losses during market downturns, long-term diversified investment can counter the decline in asset value due to inflation and low interest rates. However, improved returns are not immediately guaranteed. Because expanded risky asset exposure can increase valuation losses depending on market conditions, maintaining a balance between stability and profitability is critical. The government intends to include the principle of prioritizing subscriber interests in law and to promote measures to impose liability for damages on fiduciary corporations that violate their duties.
