"I Want to Prepare for Retirement Early"... Number of 20s Joining Pension Savings Soars

70% Increase in Pension Savings Subscribers in Their 20s
Up About 4 Times from 17.8% a Year Ago
30s Growth Rate Also Rises 10 Times from 2.3% to 21.9%
"Tax Credit Limits Should Be Raised Proactively"

[Asia Economy Reporter Song Seung-seop] It has been revealed that the number of young people subscribing to pension savings products increased significantly last year. Experts advise that to translate the rise in new subscribers into actual payment growth, government-level policy support such as tax benefits must be strengthened.

According to the Financial Supervisory Service on the 11th, the growth rate of pension savings subscribers aged 20-29 last year was 70.0%. This far exceeds the overall age group growth rate of 16.7%. Compared to the previous year's growth rate of 17.8%, it has steepened about fourfold. For those aged 30-39, the subscriber growth rate also surged nearly tenfold from 2.3% to 21.9%.

The total accumulated funds reached 160.1 trillion KRW, increasing by 7.6 trillion KRW (5.0%) from 152.5 trillion KRW a year earlier. By product type, insurance accounted for 112 trillion KRW, representing 69.9% of the total accumulated funds. Funds accounted for 24.3 trillion KRW (15.2%), and trusts for 17 trillion KRW (10.6%). While funds achieved high growth of around 30% for two consecutive years, trusts decreased by 3.3%.

The payout amount rose by 14.3% (500 billion KRW) to reach 4 trillion KRW. The pension payout per contract slightly increased from 2.93 million KRW in 2020 to 2.95 million KRW last year. The largest portion, 82.5%, received annual payouts below 5 million KRW, while only 2.1% exceeded 12 million KRW.

However, there are concerns that the average payout amount has stagnated around 3 million KRW, which is insufficient for practical retirement preparation. As of 2020, the public pension income replacement rate was 31.2%, significantly below the OECD member average of 51.8%.

To increase future payout amounts, contributions must be raised, but payments have only slightly increased over the past three years. Last year, total contributions rose by just 200 billion KRW (1.8%) to 9.9 trillion KRW. Although fund contributions surged by 1.1 trillion KRW (61.8%), contributions to insurance and trusts declined. The contribution per contract was approximately 2.37 million KRW in 2019, 2.5 million KRW in 2020, and 2.62 million KRW in 2021.

This is why there is advice to proactively raise the tax credit limits or rates to encourage voluntary expansion of contribution amounts. Financial authorities also view pension contributions as a future source of pension income tax revenue and believe it positively strengthens future government finances.

The rate of return was around 4.36%. Fund returns were the highest at 13.45%, followed by life insurance (1.83%), non-life insurance (1.63%), and trusts (-0.01%).

The Financial Supervisory Service analyzed that the declining trust returns require subscribers' attention. Returns are detailed and notified to individual subscribers twice a year through reports and can also be checked on the Integrated Pension Portal. Using the pension savings account transfer system, subscribers can switch to other products.

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