"Fund-Type Retirement Pension Needs Clear Responsibility Structure... 'Process Accountability' Is Reasonable"

Significant Difference in Average Returns Within Default Options

Fund-Type Pensions as an Alternative, Managed by Professional Institutions

Responsibility Should Be Based on the Decision-Making Process

There has been a recommendation that the scope of responsibility for users and operating institutions needs to be clearly defined regarding the fund-type retirement pension system that the government is seeking to introduce. In particular, it was emphasized that responsibility should be based on the decision-making process, rather than the 'result' such as yield.

On the morning of April 8, Youngjoo Nielsen, Professor at SKK GSB of Sungkyunkwan University, made these remarks at the '2026 Discussion on the Direction of Retirement Pension Policy and Tasks for Improving Yield,' co-hosted by Democratic Party lawmakers Kim Seungwon, Park Sanghyuk, and Park Hongbae.

Presentation materials by Professor Neilson Yeongju at the "Discussion on the Evaluation of Retirement Pension Policy Direction and Tasks to Improve Yield."

First, Professor Nielsen pointed out the problems with the default option currently applied to the retirement pension system. He stated, "There are over 400 trillion won in assets in the retirement pension market, but 85% remain in principal-guaranteed products, making it impossible to utilize the benefits of long-term compound interest." He added, "Even within the default option, the difference in average returns between the conservative type (2.63%) and the aggressive investment type (14.93%) is significant." He further noted, "A customer's fate can change dramatically depending on which financial institution and default option they choose."

Professor Nielsen viewed the fund-type retirement pension as a potential alternative to address these problems. He explained, "If the fund-type system is adopted, the fiduciary responsibility will be strengthened and the management will be handled by professional institutions," adding, "Cost reductions can lead to improved yields in the long term."

However, he stressed that in order to fully realize these advantages, "clarification of the responsibility structure" is necessary. Professor Nielsen stated, "It must be clearly established how responsibility will be assigned in cases of poor performance," and noted, "The operating entity should be responsible not for the 'result' but for the 'process.'"

He added, "The essence of pension management is long-term investment, and a certain level of volatility and performance difference is inevitable. Therefore, it is not reasonable to impose responsibility solely because 'the yield is low.' Responsibility should be discussed based on the appropriateness of the decision-making process, such as failures in product selection, asset allocation, or the management of operating institutions, rather than on yield outcomes."

On this point, Ryu Jegang, Director of Policy Division 2 at the Federation of Korean Trade Unions, said, "There has been criticism that if process responsibility is overly strengthened, no one will want to operate the fund, while if it is weakened, it could serve as an excuse for poor performance." He continued, "Within the tripartite task force, discussions have focused on legislating the principle of prioritizing subscriber interests regarding process responsibility, and systematizing standards to evaluate the appropriateness of decision-making, so that authority and responsibility are designed in a balanced manner."

Nam Sungwook, Director of the Retirement Pension Welfare Division at the Ministry of Employment and Labor, also remarked, "The most critical point is fiduciary responsibility," adding, "I believe that the direction should be for the trustee corporation operating the fund on behalf of workers or employers to prioritize the interests of the subscribers, and for the management and supervision systems enabling this to form the core of the system."

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