The Saving Encouragement Fund for Property of Agricultural & Fishing Houses has received three recommendations for abolishment, increasing calls for the need to improve the fund and savings products. The fund has been criticized for having low necessity for medium to long-term operations and for not significantly aiding the property formation of agricultural and fishing households, leading to a decrease in participants.
The Saving Encouragement Fund for Property of Agricultural & Fishing Houses is a product launched in 1985 to support the property formation of agricultural and fishing households. Participants can receive the principal and interest, as well as tax-exemption benefits and savings encouragement funds if they save for a certain period. A maximum of 200,000 won can be deposited monthly, and additional encouragement interest rates ranging from 0.9% to 4.8% are applied based on the base interest rate (3.68%), the year of joining, and income, all receiving tax-exemption benefits.
This fund was initially introduced for fairness with urban workers who had the Property Formation Savings Encouragement Fund, but it has remained even after that fund was abolished. The tax exemption benefits are expected to end this year according to the Special Taxation Limitation Act, but a proposal to extend these benefits until 2029 is currently in the National Assembly.
The problem is that as the popularity of this savings diminishes, the necessity for the fund's operations is also decreasing. According to NongHyup on the 2nd, the balance of the Saving Encouragement Fund for Property of Agricultural & Fishing Houses, operated by the Financial Services Commission, decreased from 12.562 billion won in 2023 to 11.262 billion won in 2024, and to 10.968 billion won in March of this year. The number of accounts also fell from 217,000 to 207,000.
The Financial Services Commission attempted to expand the target audience using health insurance systems instead of the previous criteria of farmland size and livestock number that distinguished between general and low-income agricultural and fishing households, but it did not yield positive results.
As a result, the Saving Encouragement Fund for Property of Agricultural & Fishing Houses also received a recommendation for abolishment in the fund evaluation announced in May this year, marking the third time following 2019 and 2022. The evaluation team stated, "Given the low necessity for medium to long-term operations through the fund and the continuous decrease in demand, it recommends abolishment."
According to the Ministry of Finance and Economy, the fund has long since lost its nature as a fund. A fund is an institution that operates outside of the revenue-expenditure budget to promote specific policies or research and development projects. However, the Saving Encouragement Fund for Property of Agricultural & Fishing Houses operates by planning contributions from the general budget and grants from the Bank of Korea based on the expected demand for that year.
Lee Sang-min, a researcher at the Korea National Finance Research Institute, said, "The fund has already lost its institutional effectiveness, yet it is still being maintained due to vested interests, and I believe it should be abolished."
However, it is uncertain whether the fund will be abolished. A Ministry of Finance official noted, "Just because there is a recommendation for abolishment doesn't mean it must be abolished. Each ministry needs to review the matter."
A Financial Services Commission official said, "If the fund is abolished, it needs to change to a general budget form, but in this case, the Bank of Korea finds it difficult to provide financial support, and the budget authority may face increased burdens, which poses challenges to abolishing the fund." They added, "Whether it is a fund or a budget, it is similar in that state finances are invested. I don't see any major issues with the current fund form."
In the past, the Ministry of Finance and Economy has attempted to abolish the savings product and fund. In 2003, they announced a legislative proposal to abolish the law regarding the Saving Encouragement Fund for Property of Agricultural & Fishing Houses. At that time, the ministry indicated that the issue of fairness with urban workers has been consistently raised and that there were many direct budget supports to increase agricultural and fishing income. However, this proposal was shelved due to the backlash from lawmakers. The tax-exemption benefits expiring this year are also expected to be extended due to the influence of legislators.
On the other hand, agricultural and fishing households argue that for this policy or fund to be effective, the deposit limit must be increased. The maximum monthly deposit amount was 120,000 won from 1986 to 2016, and has remained at 200,000 won since then. Even on an annual basis, the limit is capped at 2.4 million won, which raises concerns about limitations in property formation.
Choi Beom-jin, head of policy coordination at the Korea Future Farmers Association, stated, "The maximum limit is only 10 million won, leading to decreased subscription rates. As cultivating future and young farmers is emerging as a core task, it is necessary to actively utilize this." He also noted that "the plan to raise the tax-exempt limit from 10 million won to 30 million won should be considered."
However, a Financial Services Commission official said, "In 2023, efforts to increase the popularity of this savings have been made by expanding the target audience," pointing out that "decisions regarding expansion of deposit amounts or additional funding must be made by the Ministry of Finance and Economy or the Bank of Korea."