Surge in Popularity of Pension Savings Funds Amid Stock Market Boom... Reserves Up 30% in One Year

[Asia Economy Reporter Ji-hwan Park] At the end of last year, pension savings reserves continued quantitative growth, increasing by 5.7% compared to the previous year. In particular, pension savings fund reserves surged by more than 30% due to the ultra-low interest rates and the stock market boom caused by COVID-19.

According to the analysis results of the 2020 pension savings operation status announced by the Financial Supervisory Service on the 6th, pension savings reserves at the end of last year amounted to 151.7 trillion KRW (7.29 million contracts), an increase of 8.3 trillion KRW (5.7%) from 143.4 trillion KRW at the end of the previous year.

Last year, insurance accounted for 109.7 trillion KRW, or 72.3%, of pension savings. This was followed by funds at 18.9 trillion KRW (12.5%) and trusts at 17.6 trillion KRW (11.6%). In particular, funds increased by 30.5% due to the stock market boom and an increase in new contracts, surpassing the trust sector for the first time.

Pension savings are classified into pension savings trusts, pension savings funds, and pension savings insurance. Since new sales of pension trusts have been suspended since 2018, there have been no reserve payments from new subscribers, whereas funds increased due to the stock market boom.

After deducting fees, the return on pension savings last year was 4.18%, up 1.13 percentage points from 3.15% in 2019. Fund returns were the highest at 17.25%, influenced by the KOSPI index rising 7.7% from 2,197.67 to 2,873.47. This was followed by life insurance (1.77%), trusts (1.72%), and non-life insurance (1.65%).

The amount received from pension savings was 3.5 trillion KRW, an increase of 500 billion KRW over one year. However, the pension amount received per contract was 2.93 million KRW annually (244,200 KRW monthly), down 90,000 KRW from 3.02 million KRW the previous year, revealing that it is still insufficient as a means of retirement preparation.

New pension savings contracts numbered 594,000, an increase of 109.6% compared to the previous year. New contracts for pension savings funds increased by 279.3% to 468,000. This was due to a significant increase in the opening of pension savings accounts for fund trading amid last year's stock price rise. In contrast, pension savings insurance contracts decreased by 21.2% to 126,000.

Last year's cancellations totaled 279,000 contracts, a 1.3% increase from the previous year. Among cancellations, 96.7% (279,000 contracts) were voluntary early terminations such as lump-sum withdrawals.

The Financial Supervisory Service stated, "We plan to encourage consumers to manage pension savings in a long-term and stable manner and actively support the utilization of pension savings tax benefits."

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