retirement pensions, USA News: The government is pursuing mandatory external accumulation of retirement pensions for all workplaces alongside the expansion of fund-type systems and an increase in the investment limit for risky assets. These structural changes seek to improve returns by shifting focus away from principal-guaranteed products, now that accumulated reserves have exceeded 500 trillion won. However, challenges remain regarding market volatility losses and fiduciary responsibility.
By the end of last year, retirement pension reserves reached 501.4 trillion won, marking a 16.1% increase from the previous year after surpassing 400 trillion won in 2024. While retirement pensions support old-age income alongside the National Pension Service, long-term average annual returns have historically remained in the 2% range. Although a bull market boosted returns to an all-time high of 6.5% last year, critics argue that asset growth is restricted because major portions of reserves stay in cash-like assets and principal-guaranteed products. Workplace adoption rates have stalled at 26.5% over the past decade, and intermediate withdrawals for housing purchases continue to weaken the system’s function.
On October 29, 2026, the Ministry of Employment and Labor announced a joint plan with relevant ministries to strengthen retirement pension functions. The core initiative mandates external accumulation of retirement benefits for all workplaces by 2030 to encourage long-term accumulation and receipt. External accumulation involves employers entrusting funds to external financial institutions, reducing risks associated with business closures or management deterioration. In 2025, unpaid retirement benefits accounted for 41.1% of unpaid wages, totaling 822.9 billion won. Additionally, the government is introducing retirement pension-backed loan products to minimize intermediate withdrawals for urgent funding.
Fund-Type Systems and Professional Management
The fund-type retirement pension pools reserves from multiple workplaces for professional management institutions to oversee. Unlike contract types where subscribers choose individual products, professional entities manage asset allocation and investment decisions to increase long-term operational efficiency. The government plans to activate financial institution open-type, union-type, and public institution open-type fund structures. The “Pureun Seed” fund for small and medium-sized enterprises serves as a domestic public fund-type model, recording annual returns of 6.97% in 2023, 6.52% in 2024, and 8.67% in 2025 while maintaining more than 70% safe asset investments in bonds.
Balancing Stability and Profitability
The government is also reviewing plans to gradually raise the 70% investment limit for risky assets in contract-type retirement pensions. While risky assets like equity funds can suffer losses during downturns, long-term diversified investment helps counter asset value decline caused by inflation and low interest rates. Nevertheless, improved returns are not immediately guaranteed. Increased valuation losses remain possible depending on market conditions. Consequently, the government intends to incorporate the principle of prioritizing subscriber interests into law and promote liability measures for fiduciary corporations that violate duties, addressing information gaps and moral hazards.
