It’s a common goal of every government to build a society where even the most vulnerable members can spend their golden years free of financial worries. Now, Korea takes another step toward that goal. The Financial Services Commission picked developing new pension products tailored to various consumer needs as one of the seven key financial policies for the year of 2014. Korea is still a novice when it comes to a pension system and now, she is about to transform its system to come up with more stable, effective and customized pension products.
The new focus of the pension products development will be on protecting financially-marginalized consumer groups, such as the disabled, low-income earners or baby-boomer retirees. For example, the FSC will launch a new pension insurance product for the disabled in coming April. And it’s not just like any other pension insurance product we have encountered before. Not only will it offer a 15% raise in its insurance, the insurance premium will be lowered by 15%. Moreover, compared to the previous insurance products in which the customer is entitled to receiving the pension only when he or she is over the age of 44, the pensionable age for the new product will be lowered to 20s-30s.
Well then, how can the government afford such costly products? The FSC found out that the disabled has shorter pension entitlement period on average than healthy people, and that’s why it decided to increase the insurance while lowering the pensionable age. Moreover, the pension product will be processed through the online marketing channel to lower the cost.
The FSC plans to launch other products such as ‘Health Care Pension’; with this product, the customer’s pension will be adjusted depending on his or her health situation. The FSC is also considering giving policy incentives such as tax exemptions to encourage more low-income earners and baby boomers to sign in the new pension products.
The new pension products will be focused on matching the needs of various consumer groups and do so while giving more at their pensionable age and receiving less insurance premium. Creating a strong and dependable pension system is essential to build a stable society where the public trust the financial sector and thus have low market uncertainty.