Key Takeaways
- • South Korea's major financial groups are preparing for a competitive battle over retirement savings as the government readies a fund-based pension system, with operator selection expected by year-end, according to industry sources cited by The Korea Herald.
- • Combined defined contribution and individual retirement pension assets at the five major financial groups reached 174.14 trillion won ($130.9 billion), up 15.5% from the end of last year.
- • Securities affiliates' pension assets surged 36.4% over the same period, lifting their share of group pension assets to 13.2% from 11.2%.
- • The proposal to let asset managers hold equity stakes in pension trustee entities could shift competitive balance away from banks, which currently dominate the market.
- • Hanwha, NH NongHyup, KB, Woori, Hana and Shinhan have all formed task forces or cross-affiliate working groups to pursue operator status.
Summary
South Korea's major financial groups are gearing up for a new contest over retirement savings as the government prepares to introduce a fund-based pension system. The model could reshape competition among banks, securities firms, asset managers and insurers. Banks enter with large customer bases and established pension businesses, but securities and asset management firms could gain ground as investment performance becomes more important. A proposal allowing asset managers to hold stakes in pension trustee entities could further shift the balance. Industry sources said on Thursday that operators are expected to be selected by year-end.
Major groups are consolidating banking, securities, insurance and asset management affiliates to compete. NH NongHyup Financial Group has set up a business strategy council and made the new system a priority for next year. KB Financial Group and Woori Financial Group have formed cross-affiliate working groups, Hana Financial Group has studied pension systems in Australia and the United Kingdom, and Shinhan Financial Group plans a dedicated task force. Hanwha Life Insurance, Hanwha General Insurance, Hanwha Investment & Securities and Hanwha Asset Management held a joint event earlier this month and explored a Korean-style pension fund model with input from UK-based consultancy WTW.
Under the proposed system, separate trustee entities would pool retirement savings from multiple employers and invest them on behalf of participants, who would bear investment gains and losses. The government envisions open funds involving financial institutions, consortium-based funds involving labor unions and nonprofit organizations, and funds established by public institutions. The Financial Supervisory Service and the Ministry of Employment and Labor have briefed executives from major banks, insurers and securities firms. While lenders benefit from large pension asset bases and customer networks, the model places greater emphasis on asset allocation and long-term returns, areas where securities and asset management affiliates could play a larger role.
Securities affiliates are already expanding in the retirement pension market. Combined DC and IRP assets at the five major groups reached 174.14 trillion won ($130.9 billion), up 15.5% year to date, with securities affiliates accounting for about 35% of NH NongHyup's pension assets and around 14% at KB and Shinhan. Shares at Hana and Woori remain in single digits. Eligibility requirements for trustee entities and rules governing investment management responsibilities are still being finalized, leaving the competitive landscape uncertain.
An unnamed financial industry official said the affiliate that leads will depend on each group's strengths and business structure, with trustee governance and the scope of investment authority ultimately determining how competition unfolds. Min Ju-young, executive director of the Pension Business Division at Shinyoung Securities, wrote in a recent column that the reform's success should be judged by how much additional monthly income it delivers to retirees rather than by the size of the funds established.
Major groups are consolidating banking, securities, insurance and asset management affiliates to compete. NH NongHyup Financial Group has set up a business strategy council and made the new system a priority for next year. KB Financial Group and Woori Financial Group have formed cross-affiliate working groups, Hana Financial Group has studied pension systems in Australia and the United Kingdom, and Shinhan Financial Group plans a dedicated task force. Hanwha Life Insurance, Hanwha General Insurance, Hanwha Investment & Securities and Hanwha Asset Management held a joint event earlier this month and explored a Korean-style pension fund model with input from UK-based consultancy WTW.
Under the proposed system, separate trustee entities would pool retirement savings from multiple employers and invest them on behalf of participants, who would bear investment gains and losses. The government envisions open funds involving financial institutions, consortium-based funds involving labor unions and nonprofit organizations, and funds established by public institutions. The Financial Supervisory Service and the Ministry of Employment and Labor have briefed executives from major banks, insurers and securities firms. While lenders benefit from large pension asset bases and customer networks, the model places greater emphasis on asset allocation and long-term returns, areas where securities and asset management affiliates could play a larger role.
Securities affiliates are already expanding in the retirement pension market. Combined DC and IRP assets at the five major groups reached 174.14 trillion won ($130.9 billion), up 15.5% year to date, with securities affiliates accounting for about 35% of NH NongHyup's pension assets and around 14% at KB and Shinhan. Shares at Hana and Woori remain in single digits. Eligibility requirements for trustee entities and rules governing investment management responsibilities are still being finalized, leaving the competitive landscape uncertain.
An unnamed financial industry official said the affiliate that leads will depend on each group's strengths and business structure, with trustee governance and the scope of investment authority ultimately determining how competition unfolds. Min Ju-young, executive director of the Pension Business Division at Shinyoung Securities, wrote in a recent column that the reform's success should be judged by how much additional monthly income it delivers to retirees rather than by the size of the funds established.
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