Mid-sized Retirement Pension Fund Management Committee Selects Two OCIOs... Fees at 0.2% Range

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[Asia Economy Reporter Hwang Yoon-joo] The Small and Medium Enterprise Retirement Pension Fund Management Committee (Fund Management Committee) has selected two external delegated investment management organizations (OCIOs) and established a basic policy of applying the lowest fees.

According to the Fund Management Committee on the 19th, at the first meeting, it was decided to select one asset management company and one securities company as OCIO operators. The retirement pension fees were also set at the lowest level of around 0.2%.

The Korea Workers' Compensation and Welfare Service will announce through the Public Procurement Service by the end of this month the selection of a total of two OCIO operators and one bank responsible for retirement pension payment and collection, and will accept applications for the retirement pension fund system targeting small and medium enterprises with fewer than 30 employees from September 1.

In particular, the Fund Management Committee is known to have considered the conditions of minimum fees and guaranteed minimum returns as important in the future operation of the fund. After discussions, it was decided to first apply the minimum fee condition.

This is because retirement pension fees (total cost burden rate) are higher than those of the National Pension Service. In 2021, the retirement pension fee was 0.417%, which is significantly higher than the National Pension Service's 0.08%. A Fund Management Committee official explained, "As part of the incentive for small and medium enterprises to join, we first decided on the minimum fee," adding, "Considering the pension subscription period and compound interest effect, a 0.1% reduction in fees has a significant impact."

The Korea Workers' Compensation and Welfare Service aims to enroll 10,263 workplaces and 73,894 workers this year. The fund amount target for this year is about 661.9 billion KRW. The plan is to expand to 7.3993 trillion KRW by 2025 and 17.3628 trillion KRW by 2030.

The OCIO bidding is expected to favor large companies capable of supporting retirement pension businesses. The fund size is small, and the lowest fees are charged. From the perspective of asset management companies or securities companies, it means it is difficult to generate profits from the OCIO business.

An industry insider said, "The retirement pension market has its own entry barriers such as management know-how, so it is advantageous to secure a position early," adding, "Everyone is entering the OCIO business not for profitability but for the market potential of the retirement pension."

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