The Democratic Party of Korea is speeding up efforts to turn retirement pensions into a fund. The argument is that fund conversion is needed to raise retirement pension returns from the 2-3% range so retirees can make up for insufficient old-age income. The National Pension Service has also shown willingness to fund retirement pensions, saying it would establish a competitive system in a retirement pension scheme largely run by private institutions.
The Democratic Party special committee on pension reform held a forum at the National Assembly members' office building on the afternoon of the 29th under the theme "Exploring ways to strengthen the public role of retirement pension fund conversion." It is the committee's second forum on retirement pension fund conversion, following one in September last year.
Retirement pension fund conversion centers on pooling retirement pensions that corporations and individuals have managed separately and managing them professionally to raise returns. The ruling party and the government are considering creating a retirement pension fund and having public institutions manage it, as with the National Pension Service, citing the lower returns of retirement pensions compared with other pensions. The idea is to build a "multi-layered income security system" by including retirement pensions, which are private pensions, within the public pension framework such as the National Pension Service and the basic pension.
On this day, National Pension Service (NPS) Chairman Kim Sung-ju attended the forum in person and signaled willingness to participate in retirement pension fund conversion. He said that if the retirement pension fund is managed using the portfolio held by the National Pension Service's fund management headquarters, returns can be firmly ensured. He also emphasized that the participation of the National Pension Service in retirement pension management would change the competitive landscape centered on private asset managers.
Kim said, "The average return on retirement pensions is about 2-3%. We need to open the way for public pension funds, including the National Pension Service, to enter the retirement pension market," adding, "Why build entry barriers? If the National Pension Service manages retirement pensions, expense can be cut to one-third and returns can be guaranteed threefold."
Nam In-soon, a Democratic Party lawmaker who chairs the special committee, said, "The reason the committee is discussing retirement pensions is the recognition that the role of retirement pensions is extremely important in a reality where it is difficult to guarantee old-age income with the National Pension Service alone," adding, "Fund conversion should be defined not merely as a means to raise revenue but as an institutional shift that reliably guarantees workers' old-age income."
There is also significant pushback against retirement pension fund conversion. Critics say turning retirement pensions into a public fund would limit individuals' management authority and make accountability unclear if management fails. There are also suspicions that the government may use retirement pension fund conversion to prop up the capital market.
President Lee Jae-myung also said at a press conference on the 21st, "The average annual return for typical funds is in the 7-8% range, but retirement pensions are in the 1% range. We cannot continue to leave them as they are when they are below bank interest levels," adding, "Fund conversion for retirement pensions is one option, but if the majority does not want it, we will not do it."