"Emergency Household Funds for COVID-19, Retirement Pension Utilization Should Be Considered"

On the 26th, the first weekend after the easing of social distancing measures, believers are heading to the main sanctuary for worship at Yoido Full Gospel Church in Yeongdeungpo-gu, Seoul. Photo by Moon Honam munonam@

[Asia Economy Reporter Oh Hyung-gil] There has been a claim that it is necessary to actively utilize collateral loans or exceptionally ease mid-term withdrawals for retirement pension subscribers who need emergency funds due to the novel coronavirus infection (COVID-19) crisis.

On the 26th, the Korea Insurance Research Institute released a report titled "Review of Retirement Pension Utilization Due to the Surge in Household Emergency Fund Demand," which included this content.

The report explained that the United States included provisions allowing emergency withdrawals and collateral loans from retirement pensions in its COVID-19 response support legislation.

The U.S. retirement pension system has various withdrawal methods during the accumulation phase before retirement, but to protect the funds for retirement income, early withdrawals such as mid-term withdrawals, emergency withdrawals, and loans have required employer approval and strict criteria.

However, under the U.S. "Coronavirus Aid, Relief, and Economic Security Act" (commonly known as the CARES Act), individuals meeting certain conditions can make emergency withdrawals of up to $100,000 from their retirement pensions without penalties.

This applies if the individual, spouse, or dependents are diagnosed with COVID-19, or if they are temporarily laid off, dismissed, have reduced working hours, or are unable to work (due to quarantine, etc.) because of COVID-19. They are allowed emergency withdrawals and collateral loans from their retirement pensions through the CARES Act.

In South Korea, there is no separate emergency withdrawal system for retirement pensions, but mid-term withdrawals and collateral loans are possible for various reasons without employer approval or penalties. However, mid-term withdrawals or collateral loans are not allowed in cases of infectious disease infection.

Therefore, the report argued that it is necessary to allow exceptional methods for retirement pension subscribers facing difficulties due to the COVID-19 crisis.

As of the end of last year, South Korea's retirement pension system had accumulated funds amounting to 221.2 trillion won. This is about 30% of the National Pension Fund (737.7 trillion won). The accumulated retirement pension fund per subscriber was approximately 35.29 million won.

Kim Jin-eok, Senior Director at the Korea Insurance Research Institute, said, "It is necessary to first consider utilizing collateral loans or exceptionally allowing mid-term withdrawals for retirement pension subscribers who need emergency funds due to COVID-19," adding, "It is urgent to include infectious diseases like COVID-19 as subjects for mid-term withdrawals and collateral loans through a notice by the Minister of Employment and Labor under the current Enforcement Decree of the Retirement Benefits Security Act, specifically under the notice for 'other natural disasters, etc.'."

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