Retirement Pension Yield No.1 Securities '2x Difference'... 1 Trillion 'Money Move' from Insurance and Banks

[Asia Economy Reporter Lee Seon-ae] Among the financial sectors, the securities industry recorded the highest retirement pension yield as of the end of the third quarter this year. The phenomenon of 'Money move,' where retirement pension funds shift from insurance and banking to securities, is expected to accelerate further.

According to the Financial Supervisory Service's Integrated Pension Portal on the 26th, the average yield of the principal and interest non-guaranteed type individual retirement pension (IRP) in the securities industry was 6.76% as of the end of the third quarter. This yield was more than twice as high as that of the insurance industry at 2.85% and the banking industry at 2.50%.

The top securities company was Shin Young Securities. Shin Young Securities' IRP yield reached 12.89%. Following were Korea Post Securities (9.55%), Yuanta Securities (7.63%), Mirae Asset Securities (7.55%), Korea Investment & Securities (7.25%), Samsung Securities (7.24%), Shinhan Financial Investment (6.64%), Daishin Securities (6.42%), Hana Financial Investment (6.14%), NH Investment & Securities (5.76%), KB Securities (5.62%), Hanwha Investment & Securities (5.36%), Hi Investment & Securities (3.96%), and Hyundai Motor Securities (2.69%).

Shin Young Securities also posted the highest yields for defined benefit (DB) and defined contribution (DC) plans, at 4.25% and 10.85%, respectively. However, its accumulated reserves remained in the lower ranks at 168.9 billion KRW. The securities company with the largest accumulated reserves was Mirae Asset Securities, with 15.3792 trillion KRW, and the increase this quarter alone reached 2.335 trillion KRW, accounting for about 23% of the total market increase. Mirae Asset Securities maintains its dominant position in retirement pensions by securing both reserves and yields (DC 8.12%).

Korea Investment & Securities and Samsung Securities are also accelerating their strong positions in retirement pensions. Korea Investment & Securities and Samsung Securities have accumulated reserves of approximately 7 trillion KRW and 6 trillion KRW, respectively, and boast top-tier yields (Korea Investment & Securities DC 7.69%, Samsung Securities DC 8.23%).

The money move of retirement pension funds is expected to accelerate further. The popularity of securities companies' retirement pensions is attributed to investments in exchange-traded funds (ETFs). The scale of IRP funds moving from banks and insurance to securities (based on Mirae Asset, NH, Korea Investment, and Samsung Securities) increased from 156.3 billion KRW in 2019 to 437.4 billion KRW last year, and reached 798.7 billion KRW by the end of the third quarter this year. The financial investment industry expects that the total for all securities companies will approach 1 trillion KRW by the end of the year.

The ETF investment balance in DC and IRP accounts of the four securities companies also surged about 12 times, from 183.6 billion KRW in 2019 to 2.2199 trillion KRW by the end of the third quarter. It already exceeded last year's annual performance with 1.3024 trillion KRW in the first quarter alone. The Korea Exchange explained, "ETF investments through pension accounts are rapidly increasing due to the long-term investment trend and tax-saving effects."

Banks have recently launched 'retirement pension ETFs' that allow DC and IRP subscribers to invest in ETFs to prevent customer attrition in retirement pensions, but their effectiveness is questionable. This is the first time banks have launched products that allow ETF investments through retirement pension accounts. Banks had been preparing a system to enable real-time ETF trading in retirement pension accounts in cooperation with securities firms, but faced obstacles when financial authorities interpreted that real-time trading brokerage is an exclusive business area of securities companies. As a result, banks introduced a 'circumventing investment' method where the bank executes ETF trades on behalf of subscribers after receiving orders. This method has the disadvantage of delayed trading, as real-time trading is not possible and transactions are executed with a time lag.

A financial investment industry official said, "At the end of last year, banks held 130 trillion KRW out of the total 255 trillion KRW retirement pension balance, accounting for half, but funds are rapidly flowing out to securities due to the retirement pension ETF investment boom. Banks have launched retirement pension ETFs as a minimal defense measure, but without real-time trading, there is little merit, so it will be difficult to prevent outflows."

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