When Contracting Retirement Pension, an Explanation Document Including 'Possibility of Disadvantages' Must Be Provided

'Improvement Measures for Retirement Pension Practices and Terms'
Completion of Improvement Tasks Required by Year-End

[Asia Economy Reporter Kim Hyo-jin] From now on, when entering into an Individual Retirement Pension (IRP) contract, a 'Key Information Document' related to the product must be provided. Additionally, procedures will be improved to allow customers to be aware of disadvantages related to redemption in advance.

On the 26th, the Financial Supervisory Service (FSS) announced a plan titled 'Promotion of Improvement in Unreasonable Retirement Pension Practices and Terms and Conditions.'

The FSS judged that financial companies tend to emphasize only the benefits of joining when concluding an individual IRP contract, and do not actively provide guidance on disadvantages upon cancellation or fees.

There have been frequent complaints that subscribers were not informed at the time of subscription about the tax on early termination or retirement pension fees, which they became aware of later when canceling or receiving yield notices.

Accordingly, the FSS requires that when concluding an individual IRP contract, a key information document summarizing essential matters that subscribers must know be provided to the subscriber. This includes information such as the imposition of other income tax (16.5%) on self-contributions and interest that received tax deductions upon early termination.

There were also many complaints that financial companies did not provide sufficient guidance on redemption fees for retirement pension funds, causing subscribers to be unaware of them.

Most open-ended retirement pension funds without maturity do not have redemption fees, but some private funds and maturity-matching open-ended funds impose redemption fees to compensate for losses that may occur to remaining beneficiaries.

Therefore, the FSS's policy is to ensure that consumers can be informed in advance of disadvantages related to redemption by, for example, directly recording redemption fees on the 'operation instruction form,' and to have financial companies check whether any retirement pension funds presented to consumers unnecessarily impose redemption fees.

The FSS also reflected guidance on limit settings in the 'Retirement Pension Subscription Application Form' and established a 'Annual Contribution Limit' section, allowing subscribers to manually fill in the limit themselves, and enabled limit changes through non-face-to-face channels (internet, phone, etc.).

This aims to improve issues where some financial companies arbitrarily set or register contribution limits or fail to provide sufficient guidance, causing subscribers to set excessively high limits on certain accounts, making it impossible to open additional accounts or requiring branch visits to change limits, thus causing inconvenience to subscribers.

Additionally, the FSS plans to improve the operation instruction form to separately receive instructions for irregularly paid corporate contributions (performance bonuses, retirement allowances) and to delete the clause in the terms and conditions that suspends operation management services when fees are unpaid.

Regarding the issue that insurance companies' retirement pension terms do not specify fees at the pension receipt stage, making it difficult for subscribers to recognize, the FSS will require that the fee rates at the pension receipt stage be indicated in the retirement pension terms as well.

The FSS plans to ensure that these improvements are implemented in the field by the end of this year. However, matters requiring the establishment of IT systems, such as distinguishing irregular payment operation instructions, will be implemented by the first quarter of next year.

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