[1mm Financial Talk] Default Option Launch... Banking Sector Engages in Early Power Struggle

Shinhan "Top in Reward Points", KB Kookmin "Yield"

Since the implementation of the default option system for retirement pensions on the 12th, intense competition has erupted among banks from the very beginning. Shinhan Bank is emphasizing product sales volume, while KB Kookmin Bank is focusing on returns, both engaging in a defensive battle to maintain their market positions.

According to the Ministry of Employment and Labor's data on default option product sales and management performance as of the 25th, Shinhan Bank ranked first among 31 operators with approximately 333.3 billion KRW in accumulated funds for the second quarter. The gap with second-place KB Kookmin Bank (about 311.8 billion KRW) is around 21.5 billion KRW.

The default option system automatically selects and manages investment products according to a predetermined method if defined contribution (DC) or individual retirement pension (IRP) account holders do not provide investment instructions for a certain period on their accumulated funds. Inside and outside the financial sector, there have been preparations for a potential 'money move' where funds flow into securities companies and others that yield high returns following the system's implementation.

Shinhan Bank cited the establishment of a retirement pension customer management center and the holding of related customer briefings prior to the default option implementation as strengths. Emphasizing its top position in accumulated funds, Shinhan Bank stated, "We are focusing our capabilities on customer management and improving returns to ensure the early establishment of the system," adding, "Through consultations with dedicated staff possessing professional knowledge, we will do our best to help customers manage their retirement pensions more systematically."

KB Kookmin Bank, narrowly trailing Shinhan Bank, is emphasizing its high returns. Among the seven default option products offered by Kookmin Bank, four recorded returns exceeding 10%. The high-risk No. 2 product achieved an annualized return of 21%, the medium-risk No. 1 product 15.42%, the high-risk No. 1 product 13.37%, and the low-risk No. 2 product 10.83%.

According to the Ministry of Employment and Labor, Kookmin Bank's "Default Option High-Risk Portfolio No. 1" product outperformed related products from securities and insurance companies, ranking first among all high-risk products with a 3-month return of 5.83% and a 6-month return of 14.16%. Kookmin Bank also commented, "To create a high-performing fund and portfolio, we conducted about 5,400 simulations to determine the allocation of constituent products," adding, "This high return is the result of creating a product that meets customer needs by considering various factors such as customers' investment tendencies, life cycle suitability, and the recognition of asset managers."

Besides these two banks, the top ranks in default option accumulated funds are mainly occupied by commercial banks. Among the top 10 operators, Shinhan and KB lead, followed by Hana Bank (147.6 billion KRW), NH Nonghyup Bank (120.3 billion KRW), Woori Bank (63.6 billion KRW), Industrial Bank of Korea (8.3 billion KRW), and Daegu Bank (7.5 billion KRW). Large securities firms such as Mirae Asset Securities (41.4 billion KRW), Samsung Securities (33.6 billion KRW), and KB Securities (9.2 billion KRW) have yet to catch up with the banking sector.

However, industry insiders believe that since the system is still in its early stages, other trends are likely to emerge later. A financial sector official said, "Given the nature of retirement funds and the unfavorable market conditions, funds are currently concentrated in banks with stable profiles, but the role of securities companies is expected to grow gradually."

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