Government Pushes to Eliminate Default Option Products to Boost Pension Returns

The government has decided to stop adding to or excluding underperforming default option products from the market in order to improve the return on retirement pensions. This move stems from the fact that, despite recent improvements in pension returns, the investment model centered on safe assets still persists.

Last year, pension assets totaled 501 trillion won, an increase of 70 trillion won from the previous year, with 75% invested in principal-protected products. Some argue that this safety-oriented investment tendency may hinder long-term investment return improvements. Additionally, the proportion of workplaces introducing pensions over the past decade remains at 26.5%, indicating a growth bottleneck.

To enhance pension returns, the government will implement for the first time a return evaluation of default option products and take unfavorable measures such as exiting or halting new additions for underperforming products. At the same time, it is reviewing the institutionalization of pilot projects involving AI-powered pension robo-advisors for full discretionary investment. This initiative aims to improve pension operation efficiency.

Furthermore, to prevent early withdrawal of pensions, the government will promote the use of new guarantee loan products to curb mid-term withdrawals and develop products that share investment returns and inflation risks at the time of pension disbursement. This is intended to encourage pension payouts and expand long-term pension assets.

Revisions including phased mandatory pension contributions and the introduction of fund-based pensions are expected to be promoted within the year. These changes are anticipated to positively impact the overall market by improving pension operation efficiency and encouraging workplace pension adoption.