The Top High-Yield Bank for DC-Type Retirement Pensions Is 'Hana'

Hana Bank Tops with 7.75% Yield on Principal-Non-Guaranteed Products
Customized Services by Pension Business Unit Effective... Shinhan and Kookmin Also Improve

[Asia Economy Reporter Kim Min-young] KEB Hana Bank ranked first among banks in the rate of return on principal-guarantee-free products within defined contribution (DC) retirement pensions. The previously low returns of major commercial banks' retirement pensions have turned to an improving trend.

On the 30th, Asia Economy analyzed the retirement pension returns of banks disclosed on the Financial Supervisory Service's Integrated Pension Portal and the Bank Federation. As of the fourth quarter of last year, Hana Bank's DC-type retirement pension principal-guarantee-free product reserves amounted to 386.3 billion KRW, with a period return rate of 7.75%, the highest among banks.

Following was Shinhan Bank, managing reserves of 1.0161 trillion KRW with a return rate of 7.12%. Kookmin Bank (916.8 billion KRW) had 5.98%, Woori Bank (518 billion KRW) 5.60%, and NongHyup Bank (337.2 billion KRW) 4.70% return rates, respectively.

Retirement pensions are divided into DC type, where employees directly manage funds, and defined benefit (DB) type, managed by companies. The DB type is operated conservatively as companies guarantee only the principal and interest, similar to the existing retirement pay system. In contrast, the DC type is designed to maximize returns through communication between financial companies and employees. When comparing retirement pension returns of financial companies, the focus is mainly on principal-guarantee-free products within the DC type.

Principal-guarantee-free products in the DC type include domestic equity funds, domestic and foreign bonds, overseas stocks, and target-date funds (TDFs) sold by U.S. global fund companies.

Hana Bank's return rate is particularly notable for its sharp turnaround within one year. In the fourth quarter of 2018, Hana Bank's DC-type non-guaranteed return rate was -6.36%. This was due to the significant decline in the domestic stock market in the second half of 2018, which directly impacted the returns. Shinhan (-3.76%), Kookmin (-3.99%), Woori (-4.85%), and NongHyup (-5.15%) also recorded negative returns at that time but turned positive last year.

Hana Bank's individual retirement pension (IRP) return rate was also high at 7.75% compared to other banks. The individual IRP refers to a retirement fund account that employees subscribe to directly for their retirement. Similar to the DC type, returns depend on portfolio management by subscribers and financial companies.

This improvement in Hana Bank's returns is the result of providing customized services centered on the pension business division established in June last year. Through the Pension Customer Asset Management Center, they offered proactive maturity management and rebalancing of low-interest products, providing one-on-one tailored consultations to customers. A Hana Bank official said, "Through the Asset Management Center, we contacted customers with low returns to readjust portfolios and focused on qualitative management by minimizing idle assets."

However, the overall DC-type return rate, including principal-guaranteed products, is relatively low at 2.39% for Hana Bank. This is because 3.709 trillion KRW is accumulated in principal-guaranteed products within the DC type, which yielded only 1.85%. A Hana Bank official stated, "This year, to increase the overall DC-type product return rate, we plan to diversify the principal-guaranteed product group, which is heavily concentrated in bank time deposits. We are working to secure guaranteed interest insurance (GIC) products that offer higher interest than time deposits through exclusive partnerships with life insurance companies."

The overall DC-type return rates are highest at Shinhan Bank with 2.62%, followed by Kookmin (2.38%), Woori (2.29%), and NongHyup (2.07%).

As of the fourth quarter of last year, the total reserves combining DB type, DC type, and individual IRP were highest at Shinhan Bank with 22.6591 trillion KRW among banks, followed by Kookmin Bank with 20.0907 trillion KRW, Hana Bank with 15.6315 trillion KRW, Woori Bank with 14.0192 trillion KRW, and NongHyup Bank with 12.1165 trillion KRW.

This content was produced with the assistance of AI translation services.