Pension Ants' IRP Enrollment Surges... Retirement Pension Nears 300 Trillion Won

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[Asia Economy Reporter Ji Yeon-jin] Last year, retirement pensions increased by 40 trillion won, bringing the total accumulated amount close to 300 trillion won.

According to the Ministry of Employment and Labor and the Financial Supervisory Service, the size of retirement pension reserves as of the end of last year was 295.6 trillion won, an increase of 40.1 trillion won compared to the previous year-end. Retirement pension reserves have been increasing annually, recording 190 trillion won in 2018, 221.2 trillion won in 2019, and 255.5 trillion won in 2020.

By type of retirement pension, as of the end of last year, the defined benefit (DB) plan accounted for the largest share at 171.5 trillion won, or 58% of the total, followed by defined contribution (DC) plans at 77.6 trillion won, and individual retirement pensions (IRP) at 46.5 trillion won.

The largest increase compared to the previous year was in individual retirement pensions, which grew by 35.1% (12.1 trillion won), followed by defined benefit plans with an 11.4% increase (17.6 trillion won). Among the total retirement pension reserves, principal-guaranteed plans accounted for 255.4 trillion won, or 86.4%, while performance-based plans accounted for 40.2 trillion won, or 13.6%.

A Financial Supervisory Service official stated, "Defined contribution and individual retirement pensions tend to have a relatively high proportion of performance-based management," adding, "The overall proportion of performance-based management also showed the highest increase in the past five years."

In terms of market share, banks held the largest portion at 50.6%, followed by life insurance companies at 22%, financial investment companies at 21.3%, non-life insurance companies at 4.8%, and the Korea Workers' Compensation and Welfare Service at 1.3%.

The annual return rate on retirement pensions was 2.00%, down 0.58 percentage points from the previous year due to continued ultra-low interest rates and stagnation in the stock market. The annualized return rates over the past five and ten years were 1.96% and 2.39%, respectively. Meanwhile, the annual return rate was 1.35% for principal-guaranteed plans and 6.42% for performance-based plans.

Among approximately 397,000 accounts that began receiving retirement pension payments last year, 95.7% chose lump-sum payments, while the proportion of pension payments increased by 1 percentage point from the previous year to 4.3%.

The average amount received per pension payment account was 188.58 million won, and the average amount received for lump-sum payments was 16.15 million won.

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