South Korea retirement pension long-term investing campaign, Digi Mart USA News (Seoul, South Korea): South Korea’s Financial Supervisory Service (FSS) has identified excessive short-term trading by subscribers and concentration in specific assets as problems and launched a joint campaign to establish a culture of long-term and diversified investing. With retirement pension reserves surpassing 558 trillion won, the agency says the importance of investment management capability has grown as more workers shift to Defined Contribution (DC) plans, under which they manage their own reserves.
On November 3, the FSS held the launch ceremony for the first “Retirement Pension LONG” campaign at the FKI Tower in Yeouido, Seoul. The event was held together with the Korea Federation of Banks, the Korea Financial Investment Association, the Korea Life Insurance Association, the Korea Insurance Development Institute and major retirement pension providers.
About 150 people attended, including FSS Governor Lee Chan-jin and the chairmen of the four financial associations.
In his opening remarks, Governor Lee said that although retirement pensions underpin life after retirement, “excessive short-term trading and concentration in specific asset classes are emerging.” He stressed that “guidance and education must be strengthened so that subscribers can practice long-term and diversified investing.” In his congratulatory address, he said he himself had struggled for about 40 minutes while selecting and setting up a default option.
The campaign adopted the slogan “L.O.N.G.,” taken from the first letters of “Learn, Open, Nurture, Grow.” The FSS and the financial industry signed a memorandum of understanding that day to spread a culture of long-term and diversified investing and agreed to jointly carry out subscriber education and regular pension account checkups.
The most notable deliverable is the 254-page Retirement Pension Guidebook. It covers each stage of the life cycle, from checking retirement readiness to choosing a plan, managing reserves and receiving payments, and also addresses the National Pension Service and pension savings.
It explains asset allocation by investment propensity, default options, Target Date Funds (TDFs) and exchange-traded funds (ETFs), age-based adjustment of investment weights, and the order of pension withdrawals, with practical examples. The booklet will be posted on the FSS and related institutions’ websites, and 5,000 printed copies will be placed at providers’ branches.
Comparison disclosures for pension products will also be strengthened in stages. Within this year, the FSS will add a ranking of TDF returns by vintage, the target retirement year, to the Integrated Pension Portal.
Next year, it plans to introduce a heat-map-based disclosure system that visualizes returns and fee levels in green, yellow and red so performance can be compared across financial companies at a glance, along with pension statistics chart functions.
The campaign will run during two intensive weeks each year. During the “Pension Fill-Up Week” in November and December, subscribers will be guided to check their reserves, contributions and tax deduction limits and to review whether to make additional contributions, while a program to help people find unclaimed retirement pensions will run in parallel.
During the “Pension Nurture Week” in May and June, an investment white paper will be published and subscribers will be encouraged to designate a default option and review their investment products.
The measures come amid rapid change in the market. Reserves stood at 558.3 trillion won (approximately $416.4 billion) at the end of June, up 11.3% from 501.4 trillion won (approximately $374.0 billion) at the end of last year and up about 46% from 382.4 trillion won (approximately $285.2 billion) at the end of 2023.
In January through July, 340,156 subscribers switched to DC plans, up 118.1% from 155,947 a year earlier. The share of performance-based products in reserves rose from 12.8% at the end of 2023 to 35.5% at the end of June, with ETF investments within that totaling 99.8 trillion won (approximately $74.4 billion).
The FSS said the problem lies in the quality of management. At the end of last year, 46.9% of DC-plan subscribers held their entire reserves in principal-guaranteed products, while 33.9% invested more than half of their reserves in risky assets.
A survey by the Korea Enterprises Federation last year found that 57.1% of respondents were interested in managing their retirement pensions but did not know how to do so in detail. The FSS said it will continue to improve products and disclosure systems and urged providers to support subscribers from product selection through pension receipt.
Separately, Governor Lee warned that management, including CEOs, will be held responsible for hacking incidents at large financial companies such as comprehensive financial investment businesses and insurers. He said he would cooperate in passing an amendment to the Electronic Financial Transactions Act that would allow punitive fines of 3% of revenue to be imposed without exception when incidents occur due to neglected security vulnerabilities.
“Even before the law is amended, we will seek various measures to strengthen security at financial companies,” he said.
