Hello, my readers! I guess everyone is in the middle of winter holiday, after having finished the second semester last month. For today, I would like to introduce you something interesting which I found at my office. I want to share it with all of you.
These days, many of insurance sales agents came to my office for their sales promotions. They introduced various insurance products and detailed plans about ‘retirement pension’. Some of my colleagues were intereted in, carefully listened to, and chose one of the products. Probably some of you might have noticed or experieced a similar thing, as it is quite common for us to perpare for retirement ages from our early days. Respoding to this trend, the retirement pension market has been growing rapidly. According to statistics, corporate pension assets, which were about KRW 14 trillion in 2009, surged to KRW 38.1 trillion in 2011. Can you believe this fugure? In only two years, the market has grown ca. 172%! This is a remarkable growth, and it implies that the retirement pension has become ‘the issue’ that we are paying lots of attention to. Yon and I, sooner or later, will find it out that retirement pension is what we actually need. With regard to it, I am going to explain the recent change in Korean retirement pension plan, assuming that this would be a helpful tip for you 😀
Broadly, there have been two revisions on the plan; Employee Retirement Benefit Security Act (ERBSA) and Regulations on the Supervision of Retirement Pensions. The former was passed in June, 2011, and the latter was recently revised and effecive as of 4th of Decemeber, 2012. It might sound a little bit out-of-date to mention the former revision.However, as the former is very closely related to the latter, we need to look at both of revisions. For your convenience, here is a table which clearly shows the descriptions included in the revision.
See? All these plans are to increase the retirement pension market and to protect financial consumers in a proper manner. In the same vein, Financial Services Commission (FSC) decided to revise the current regulations on the Supervision of Retirement Pensions. These ongoing revisions are expected to strenghten the pensionable right and pave the way for a well-established pension market.
So, what was the change so far, and how will it work?
First, a service provider is not allowed to have more than 70% of pension plan assets as its own guaranteed investment products. This regulation will take an actual effect from 1st of April this year. Many financial companies, especially banks, are highly dependent on those pension plan assets, which records more than 80% out of total assets.This is definitely not a desirable situation as it can trigger excessive competitions and raise an interest rate.
What is the next? Previous regulations on asset management were considered too strict. Accordingly, the newly revised regulations allow DC and IRP to be composed of stocks, real estates and mixture of both. The limitation is within 40 % of the accumulated pension money.
Besides these regulatory changes, the revision aims at improving the public disclosure process in order for pension service providers to keep the related information system transparent. For this ends, it is required that service providers should disclose their investment returns.
In this aging society, retirement pension is no longer a trivial issue. The retirement pension market is growing day by day, and we are expecting that our demand for better pension plans will be met. The current revision is setting a ground for a satisfactory pension system, and I hope the growth of pension market is being progressed in a desirable way.