National Pension Class Action Lead Committee Unification Agenda Deferred... Separate TF to Be Formed (Comprehensive)

[Asia Economy Reporter Park So-yeon] The government's plan to unify the authority for representative lawsuits against domestic companies by transferring it to the National Pension Service (NPS) Stewardship Responsibility Committee has been put on hold. However, a task force (TF)-level subcommittee related to the unification of representative lawsuits will be formed to continue further discussions.

The Fund Management Committee, the highest decision-making body of the National Pension Service, discussed the "Amendment to the Guidelines on Stewardship Activities" on the 25th at The Plaza Hotel in Sogong-ro, Seoul, and ultimately decided to postpone the resolution of the agenda.

The amendment was approved with modifications excluding some items such as representative lawsuits. Matters requiring additional discussion, including representative lawsuits, will be discussed by a separate subcommittee under the Fund Management Committee and then reconsidered by the Fund Management Committee.

An attendee of the Fund Management Committee said, "Regarding the National Pension Service representative lawsuits, a separate subcommittee will be formed to conduct additional discussions," adding, "Furthermore, apart from the formation of the subcommittee, it was mentioned that the current procedures for conducting representative lawsuits should continue without interruption according to existing regulations."

On the same day, the Fund Management Committee also discussed the 2021 National Pension Fund settlement (draft), adjustments to the target range for delegated alternative investments of the National Pension Fund, in addition to the amendment draft on stewardship responsibility activities including the unification of representative lawsuits.

Additionally, reports were received on the "Interim Report on Research for Establishing the Scope and Criteria of Coal Mining and Power Generation Industries for the National Pension Fund" and the "2022 Active Risk Allocation Results by Asset Class."

The 2021 settlement results of the National Pension Fund showed that the fund’s net assets amounted to KRW 948.7 trillion (as of the end of 2021), an increase of approximately KRW 115 trillion compared to 2020.

The net asset increase of KRW 115 trillion consists of fund operation income of KRW 91.2 trillion in 2021, and a net accumulation amount of KRW 24.4 trillion after deducting benefit payments of KRW 29.1 trillion from insurance premium income of KRW 53.5 trillion.

The fund operation income of KRW 91.2 trillion in 2021 corresponds to about 1.7 years of that year’s insurance premium income (KRW 53.5 trillion) and about 3.1 years of pension benefit payments (KRW 29.1 trillion).

The fund operation return rate for 2021 was 10.77% (provisional), achieving a high return rate averaging 10.57% over the past three years following 11.3% in 2019 and 9.7% in 2020.

By asset class, the fund operation return rates were 6.73% for domestic stocks, 29.48% for overseas stocks, -1.30% for domestic bonds, 7.09% for overseas bonds, and 23.80% for alternative investments, with high returns from overseas stocks and alternative investments driving the fund’s performance.

Since the establishment of the National Pension Fund in 1988 until the end of 2021, the fund’s average annual cumulative return rate was 6.76%, and the cumulative operating profit totaled KRW 530.8 trillion. Of the KRW 948.7 trillion in net assets at the end of 2021, more than half?KRW 530.8 trillion (56%)?represents profits earned through fund operations.

The fund size increased nearly 70% over the past five years, from KRW 558.3 trillion at the end of 2016 to KRW 948.7 trillion at the end of 2021, and the profits earned over the past three years amounted to KRW 236.8 trillion, accounting for about 45% of the total cumulative profits of KRW 530.8 trillion.

Furthermore, the Fund Management Committee decided to adjust the target range for delegated alternative investments of the National Pension Fund from the existing 65?95% to 65?99%.

This adjustment is intended to stably respond to the expansion of the alternative investment ratio and to enhance the fund’s profitability, according to the pension authorities.

Minister Kwon Deok-cheol stated, "The profits earned through fund operations account for more than half, 56% (KRW 530.8 trillion), of the fund’s net assets," adding, "We will strive to continuously improve fund operation profitability by closely responding to uncertain international financial markets and changing investment conditions, and contribute to the long-term stability of the National Pension’s finances."

At the meeting, key government vice ministers including Lee Ok-won, First Vice Minister of Strategy and Finance, who is an ex officio member of the National Pension Fund Committee, Park Jin-gyu, Vice Minister of Trade, Industry and Energy, Park Hwa-jin, Vice Minister of Employment and Labor, and Kim Jong-hoon, Vice Minister of Agriculture, Food and Rural Affairs, all did not attend and instead sent first-level directors as their representatives.

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