"Cannot Lose to Securities Firms"... Banks Compete to Attract Individual Retirement Pension Plans (Comprehensive)

Against Zero Brokerage Fees
Aiming to Acquire New Customers and Contract Transfers Through Various Events

[Asia Economy Reporter Park Sun-mi] As securities firms compete to attract individual retirement pension (IRP) customers by prominently offering 'zero fees (0)', banks are also actively engaged in defensive measures to prevent customer attrition by offering various gift certificates, cashback, and other events.

According to the financial industry on the 23rd, the four major commercial banks?KB Kookmin, Shinhan, Hana, and Woori?have recently launched events to secure IRP subscribers. Kookmin Bank is offering dessert set mobile coupons, chicken coupons, and more to customers who newly subscribe to IRP, transfer pension savings or IRP accounts from other companies to Kookmin Bank IRP, or convert matured Individual Savings Account (ISA) funds into Kookmin Bank IRP deposits by the end of this month. Additionally, customers who meet certain deposit reward conditions are entered into a draw to win prizes such as stylers, wireless vacuum cleaners, and coffee machines.

Shinhan Bank is providing coffee gifticons and department store mobile gift certificates through a lottery to customers who newly open an individual IRP account and register automatic transfers of 100,000 KRW or more monthly, or deposit over 1 million KRW into their IRP account during the event period, until the end of this month. Hana Bank is offering Hana Money, which can be used like cash, to a total of 1,500 customers through a lottery for those who newly subscribe to IRP via non-face-to-face channels such as internet banking or transfer contracts from other financial institutions by the end of this month. Woori Bank is giving away ice cream exchange coupons, air purifiers, and other prizes through a lottery to customers who newly subscribe to IRP with deposits of 100,000 KRW or more, register automatic transfers, or make additional deposits of 1 million KRW or more.

Individual IRP is a representative tax-saving product that offers tax deductions during year-end tax settlements. IRP provides tax deduction benefits of 16.5% or 13.2% depending on the individual's income level, up to 7 million KRW (including the pension savings tax deduction limit). Since last year, subscribers aged 50 or older can receive tax deductions up to 9 million KRW (including the pension savings tax deduction limit of 6 million KRW).

The IRP Market: Banks Hold a Large Share, but Securities Firms’ Moves Are Threatening

The active competition among banks to attract IRP customers is largely influenced by securities firms aggressively entering the IRP customer acquisition battle by eliminating management and asset management fees, which were previously charged at levels of 0.1% to 0.5%, amid abundant market liquidity and growing interest in retirement pensions.

There is a strategic calculation to prevent existing customers from leaving and to secure new customers who might move to securities firms. Last year, the size of individual IRP deposits reached 34.4167 trillion KRW, an increase of about 35.5% from 25.4 trillion KRW the previous year, indicating market expansion. According to the Financial Supervisory Service, as of the end of the first quarter, banks held 68.5% of IRP deposits, while securities firms held 23.6%, with banks leading significantly. However, the year-on-year growth rate of deposits in the first quarter was 39% for banks and 61% for securities firms, highlighting the aggressive customer acquisition by securities firms.

Riding the stock market boom, securities firms also lead in returns compared to banks, raising concerns that the IRP market, where banks currently hold a large share, could be overturned. Securities firms tend to have higher returns because IRP allows direct purchases of Exchange-Traded Funds (ETFs) or REITs, unlike other financial institutions.

According to statistics from the Korea Federation of Banks, as of the first quarter of this year, the IRP returns of the five major commercial banks were Hana (6.07%), Shinhan (5.96%), Kookmin (5.77%), Woori (4.56%), and NongHyup (3.86%). In contrast, the average IRP return of securities firms in the first quarter was 11.2%, with many firms recording double-digit returns, including ShinYoung Securities (27.39%), Yuanta Securities (13.41%), Korea Investment & Securities (12.49%), and Mirae Asset Securities (11.37%).

A representative from a commercial bank explained, "Although there is a shift in perception of retirement pensions from safe assets to investment assets, stability remains important, so simply choosing IRP based on returns alone is not a good approach. It is better to join after reviewing post-management that manages the portfolio and ensuring the safety of investment destinations."

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