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Photo courtesy of Yonhap News |
[Alpha Biz= Kim Jisun] South Korea’s National Pension Service (NPS) is poised to step into the country’s massive KRW 400 trillion (approx. USD 290 billion) retirement pension market as part of a broader initiative to reform the national pension system.
According to investment banking industry sources on August 5, the NPS has recently commissioned a research study titled “Categorizing the Functional Roles of Public and Private Pension Systems: Focusing on Basic Pension, National Pension, and Retirement Pension.” The results of the study are expected by the end of the year.
The NPS aims to clearly delineate the respective roles and functions of the country’s three main pillars of retirement income—National Pension, Retirement Pension, and Basic Pension—through the study. Based on this analysis, the agency plans to propose a new pension model tailored to Korea’s demographic and economic conditions.
In its proposal, the NPS noted:
“Despite the National Pension and Retirement Pension being designed to complement each other, the two systems have evolved in a fragmented manner, limiting the retirement pension’s contribution to securing income in old age. Rather than piecemeal adjustments, a more structural overhaul is needed based on a clearly defined and cooperative role-sharing between public and private pensions.”
Meanwhile, the Democratic Party of Korea has introduced a bill aimed at pooling retirement pensions—which are currently scattered across workplaces—into collective funds that can be professionally managed by entities such as the NPS. This is in line with ongoing discussions in the National Assembly’s special committee on pension reform, which is considering the establishment of a unified fund management structure for retirement pensions.
During last year’s National Assembly audit, the NPS responded to calls to enhance returns on retirement pension assets, stating,
“A bill to revise the Employee Retirement Benefit Security Act has been introduced (led by Rep. Han Jeong-ae) to enable the National Pension Service to serve as a fund-type retirement pension manager. We will strive to contribute to strengthening retirement income security based on the National Assembly’s legislative decisions.”
If the NPS begins managing retirement pension funds, its assets under management—which currently total approximately KRW 1,050 trillion—could grow to nearly KRW 1,500 trillion, making it one of the largest pension funds in the world.
AlphaBIZ Kim Jisun(stockmk2020@alphabiz.co.kr)
