The amount of retirement pension reserves has exceeded 255 trillion won, but the annual return is still in the 2% range. Central photo.
The amount of retirement pension reserves exceeded 255 trillion won last year. Although the size increases year by year, the annual yield remains at the 2% level for the second year in a row.
According to the Financial Supervisory Service and the Ministry of Employment and Labor’s ‘2020 retirement pension management status’ on the 4th, the retirement pension reserve is 255.5 trillion won. It increased by 15.5% from a year ago (221.2 trillion won). The retirement pension reserves have continued to increase by more than 10% each year since 2016. However, compared to the speed of being called, the yield report card is shabby.
Retirement pension status. Source: Financial Supervisory Service
The annual rate of return of the retirement pension was 2.58% last year, a mere 0.33% point increase from the previous year (2.25%). It is better than the 1% term deposit interest, but compared to the national pension, which is a public pension, the rate of return is poor. Last year, the National Pension Service achieved a 9.7% return (provisional value) from domestic and foreign stock investment. Last year’s KOSPI soared more than 30%. The long-term return also did not exceed the 2% range. The annualized rate of return for the last five years (2016-2020) was 1.85%, and in 10 years it was 2.56%.
There is a reason for the low retirement pension yield despite the booming stock market. Currently, 89% of the retirement pension reserves (22.81 trillion won) are focused on the principle and interest guarantee type, which asks money for deposits, savings accounts and insurance products. On the other hand, only 10% (27.4 trillion won) of earnings dividends that roll money through fund or direct stock investment. Depending on the way the money is rolled, the gap in yield is large. Last year, the dividend-type yield (10.7%) was 10 times higher than that of the principal and interest guaranteed type (1.7%).
Even when looking at each type of system, the reserves of the defined benefit type (DB), which are concentrated in principal and interest-guaranteed products, are the largest at 153.9 trillion won. It accounts for 60% of the total reserve. Next, KRW 67.2 trillion (26.3%) was accumulated in DC, which has a higher proportion of dividends compared to DB, and 34 trillion KRW (13.5%) was accumulated in individual retirement pension (IRP). Among the retirement pensions, the rate of increase in personal IRP is remarkable. The personal IRP increased by 35.5% during the same period, compared to the 10% increase in reserves for the DB and DC types, respectively, compared to a year ago. An official from the Financial Supervisory Service said, “As the stock price rose sharply last year, the inflow of funds to the private IRP of securities companies was remarkable.”
On the other hand, the total cost of the retirement pension, divided by the annual total cost including fees, by the average reserve at the end of the year, was 0.42%, down 0.03 percentage points from the previous year.
Reporter Yeom Ji-hyun [email protected]
