The government moved to scale back benefits for individual savings accounts (ISA) last month but began a review after five days amid public backlash, and in the meantime, the number of terminated accounts nearly tripled from a year earlier.
According to data submitted by the office of Seo Il-jun of the People Power Party, a member of the National Policy Committee, from the Korea Financial Investment Association on the 14th, a total of 18,470 ISA accounts were closed over the five trading days from the 3rd to the 7th of last month at the top 10 securities firms by subscribers.
That is a 196% increase from the same period a year earlier (6,242), and more than quadruple the same period two years ago (4,386). It is seen as fallout from the government's zigzagging approach, with the ISA reform plan overturned after five days of its announcement.
On the 3rd of last month, the Ministry of Finance and Economy unveiled the "2026 tax reform plan," signaling an overhaul of the ISA system. But as it included reducing benefits for existing ISA accounts, discontent grew among investors.
The plan included abolishing the "carryover of contribution limits" for existing ISA accounts and capping contract terms at "a maximum of five years." As a result, investors who had pursued tax savings by making long-term investments in U.S. stock exchange-traded funds (ETFs) and the like erupted in frustration.
In particular, as demand surged to switch into accounts set with the longest possible maturity before the rules took effect, a wave of cancellations broke out among investors who had previously chosen shorter maturities. Under current law, if an ISA account is terminated before the mandatory three-year enrollment period is up, the tax benefits received are forfeited.
As market turmoil grew, President Lee Jae-myung ordered a full review of the ISA reform plan on the 7th of last month, five days after it was announced. In response, on the 1st the government drew up a revised tax plan excluding the ISA benefit-reduction provisions and sent it to the National Assembly.
Meanwhile, the number of ISA accounts opened also appears to have increased. In August this year, there were 197,116 new ISA accounts, up about 45% from the prior year (136,141).
A Korea financial investment industry official said, "While new ISA sign-ups are increasing, distrust remains among existing investors who suffered unnecessary midterm-termination losses amid the policy retreat and full review," adding, "When advancing tax policy going forward, the government needs to strengthen predictability and communication with the market."