Bank Retirement Pension Returns: Hana Bank Ranks First (Comprehensive)

Last Year's Q4 Defined Contribution Principal-Not-Guaranteed Product Yield 7.75%
Shinhan Bank 7.12%, Kookmin Bank 5.98%, Woori Bank 5.60%, etc. Ranking

[Asia Economy Reporter Kim Min-young] KEB Hana Bank has been ranked first among banks in the rate of return on principal-guarantee-free products within defined contribution (DC) retirement pensions. The retirement pension returns of major commercial banks, which showed negative returns in 2018, 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, and found that 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 of 7.75%, ranking first among banks.

Next, Shinhan Bank managed reserves of 1.0161 trillion KRW and posted a 7.12% return. The order of returns was Kookmin Bank (916.8 billion KRW) at 5.98%, Woori Bank (518 billion KRW) at 5.60%, and NongHyup Bank (337.2 billion KRW) at 4.70%.

Retirement pensions include the DC type, where employees directly manage funds, and the defined benefit (DB) type, managed by companies. The DB type is operated conservatively because it is similar to the existing retirement allowance system, where the company only needs to guarantee the principal and interest to pay employees. 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 is particularly notable for a sharp turnaround within one year. In the fourth quarter of 2018, Hana Bank’s DC-type principal-guarantee-free return 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 switched to positive returns last year.

Hana Bank’s individual retirement pension (IRP) return was also high at 7.75% compared to other banks. The individual IRP refers to a retirement fund account that employees directly subscribe to for their own 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 newly established in June last year. Through the Pension Customer Asset Management Center, they provided active maturity management and rebalancing of low-interest products, offering one-on-one customized 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, including principal-guarantee products, is relatively low at 2.39% for Hana Bank. This is because 3.709 trillion KRW is accumulated in principal-guarantee products within the DC type, but the return is only 1.85%. A Hana Bank official said, “This year, to increase the overall DC-type product returns, we plan to diversify the principal-guarantee product group, which is heavily concentrated in bank time deposits. We are trying 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 is 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. This was 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. Among financial institutions, Samsung Life Insurance had the largest reserve size at 29.2287 trillion KRW.

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