retirement pensions, USA News: The government is pushing for mandatory external accumulation of retirement pensions for all workplaces, the expansion of fund-type systems, and an increase in 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 is 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, along with 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. Cases of intermediate withdrawals of reserves for reasons such as home purchases are also cited as factors weakening the retirement pension’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 the employer entrusts retirement benefit funds to an external financial institution. This can lower the risk of retirement 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. Along with this, the government is also pushing for the launch of retirement pension-backed loan products. This measure is intended to reduce the need for intermediate withdrawals of reserves for urgent funding needs, such as housing, and to encourage the maintenance of assets until retirement.
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, expectations are that professional management entities can handle asset allocation and investment decisions, thereby 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. In the financial institution open-type, a financial company or consortium acts as the management entity, while in the union-type, a non-profit corporation established by multiple employers or labor-management organizations serves this role. The public institution open-type is a method where a public organization, such as the National Pension Service, takes on management. “Pureun Seed,” a retirement pension fund for small and medium-sized enterprises, is a representative example of a domestic public fund-type system. It recorded annual returns of 6.97% in 2023, 6.52% in 2024, and 8.67% in 2025, outperforming the retirement pension average during the same period. It achieved relatively good results through professional management while maintaining the principle of investing more than 70% in safe assets such as bonds.
The government is reviewing a plan to gradually raise the investment limit for risky assets in contract-type retirement pensions. Currently, the proportion of investment in risky assets is limited to 70%. The decision is based on the judgment that while risky assets such as 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. Since the fund type or the expansion of risky assets can increase valuation losses depending on market conditions, the balance between the stability and profitability of retirement pensions is important. 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. The information gap between management entities and subscribers, the moral hazard of fiduciaries, and determining the location of responsibility when losses occur are also tasks that must be addressed during the system implementation process.
