Mobile Enrollment Available but Cancellation Not Possible for Retirement Pension Account (Comprehensive)

Benefits such as fee waivers for individual IRP enrollment via mobile
but only enrollment possible on mobile, cancellation not allowed
Delayed "System Under Construction"

[Asia Economy Reporter Park Sun-mi] Banks have made it easy to sign up for Individual Retirement Pension (IRP) accounts through mobile banking, but they do not operate account termination services, leading to consumer dissatisfaction. Even if consumers sign up for IRP using their smartphones, they must use internet banking or visit a bank branch in person to terminate their accounts.

According to the banking sector on the 17th, among the four major commercial banks, Shinhan Bank and Woori Bank do not offer mobile IRP account termination services. Although non-face-to-face IRP sign-up is immediately possible via Shinhan’s ‘SOL’ and Woori’s ‘Woori WON Banking’ apps, account termination is not available. Customers must visit a bank branch in person or, if they want to terminate non-face-to-face, they can only do so through internet banking on a PC, not via mobile. On the other hand, KB Kookmin Bank and Hana Bank operate both IRP sign-up and termination services through their proprietary applications, ‘KB Star Banking’ and ‘Hana OneQ,’ respectively.

Shinhan Bank and Woori Bank stated that they are preparing to enable termination services within their apps as soon as possible. Shinhan Bank aims for January next year, and Woori Bank targets March next year.

Among consumers, there is already dissatisfaction that while detailed information such as account balance, payment amount, and tax details can be checked non-face-to-face via internet banking, the inability to terminate accounts solely through mobile is seen as a tactic to retain customers through ‘inconvenient termination.’

In fact, the Individual Retirement Pension market is rapidly growing as financial consumers’ interest in retirement preparation increases, making competition for customer acquisition fierce. According to statistics from the Financial Supervisory Service, as of the end of September, the total IRP reserves across the financial sector amounted to 42.9 trillion KRW, a 24.7% increase compared to 34.4 trillion KRW at the end of last year. As of the end of the third quarter, the ranking of IRP reserves in the banking sector is ▲Kookmin 7.7358 trillion KRW ▲Shinhan 7.1501 trillion KRW ▲Hana 5.2655 trillion KRW ▲Woori 3.925 trillion KRW. All have seen more than a 30% increase in reserves compared to a year ago.

Rapidly Growing IRP Market... Fierce Competition for Customers Among Banks

Especially since IRP is a ‘tax-saving’ product that allows up to 16.5% tax credit on an annual limit of 7 million KRW (including tax-qualified pension savings), the competition to attract IRP customers intensifies toward the end of the year. Currently, banks are waiving fees for customers who sign up for IRP non-face-to-face or offering various prizes through lotteries.

Some express concerns that while enabling both IRP sign-up and termination via mobile banking would increase customer accessibility to financial products, it could also lead to side effects from imprudent sign-ups and terminations.

IRP accounts offer tax credit benefits (13.2~16.5%) on up to 7 million KRW annually, but if terminated early, a 16.5% miscellaneous income tax is imposed on the amount of contributions that received tax credits and the investment gains. This means taxes could exceed the amount of tax credits received. When signing up for IRP, consumers should carefully read the IRP key explanation document provided by financial companies and understand the disadvantages of termination. If both sign-up and termination become too easy via mobile banking, this area could become vulnerable.

A bank official expressed concern, saying, "Many customers who applied for IRP termination through internet banking come to the branch to complain because the actual amount received differs from the expected amount," adding, "If mobile termination services become widespread, such incidents may become more frequent."

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