Is everything all right with you? Few days ago, I found the Beatles’ song in my laptop that I didn’t know I had, so anyways I listened to ‘Let it be’ and ‘Hey Jude’, and it was so moving. If you find yourself in times of trouble, just let it be. I just wanted to say to you. So today, I’m going to introduce a personal pension to you, which will share the world upon your shoulders. It is important to ensure retirees’ financial stability in preparation for an aging society. There are there ways for retirees to prepare financially-stable life after their retirement: national pension, retirement pension, and personal pension. The income replacement ratio (the percentage of working income that an individual needs to maintain the same standard of living in retirement; usually 60-90% but 42% in Korea), however, is so low that people cannot secure enough old age income. Moreover, unlike national pension and retirement pension, personal pension is not popular thus the FSC is trying to vitalize personal pension.
The FSC is going to improve accessibility to personal pension products and raise rate of return. Many personal pension products will be sold through the internet, which is a high-accessibility channel to young workers. It is beneficial to financial institution as well in that they can reduce spending on business and operating expense considerably. In addition, because they sell only to customers who visited their website, sales commission will not occur.
After the personal pension products are made easily accessible, you will care about rate of return. There are about 660 personal pension products and they are classified into three categories according to which financial institution sells them: annuity insurance, pension trust, and pension funds. According to Financial Supervisory Service last October, the average rate of return of stock pension fund and mixed (stock+bond) pension fund was the highest, which was 122% and 98% respectively. However, it was high-risk product so that not many customers joined and benefited from it. On the other hand, the low-risk products such as annuity insurance (39.8%), pension trust (41.5%), and bond pension fund (42.6%) had large customers but its rate of return was lower than installment savings (48.4%). Because rate of return is not quite satisfactory, financial authorities advise financial institutions that they lower commission and increase rate of return. Early return rate is expected to improve.
For those of you who still wonder where you could get more information, personal annuity portal site will be built to provide old-age financial planning service and information on personal pension. For example, information about various personal pension products will be provided. You might find rate of return of the products in this one site. You will also be able to find how much tax benefit you can have or what disadvantage you should take in case of early cancellation. As the average life expectancy is getting higher, we should be prepared to enjoy the second act of our lives. Enjoy today and also tomorrow!
By Yeajin Shim (firstname.lastname@example.org)