The Democratic Party of Korea is reviewing the proposal for funding to improve the revenue of retirement pensions as part of its presidential campaign. The current retirement pension operates under contracts between individual corporations and service providers, resulting in an approximate revenue rate of 2%, which is less than half of the National Pension revenue rate. The party is pushing for legal amendments to implement a funded retirement pension system, consolidating the pensions of multiple contributors for expert integrated management.
Democratic Party of Korea presidential candidate Lee Jae-myung noted during a meeting with workers held on the theme "Wise quitting lifestyle" at a studio in Guro District, Seoul, on the 30th, that "the current revenue rate of retirement pensions does not even meet the inflation rate," adding that "if we improve the rate to the (National) Pension level, it could enhance the (working-class life) a bit more." He also emphasized the importance of ensuring that workers do not suffer in the asset market.
As of 2023, the annualized revenue rate of retirement pensions over the past five years is 2.35%. This figure does not even reach half of the National Pension revenue rate (6.86%) during the same period. As both workers and affiliated corporations individually choose investment products, 87.2% of the total reserves are tied up in principal-protected products. This indicates a structural limitation in increasing revenue. Particularly, the percentage of those receiving lump sums amounts to 90% of the total, distancing the system from its role of providing "stable retirement income security."
Within the Democratic Party of Korea, a plan is being discussed to consolidate the contributors' reserves into a fund, similar to the current National Pension system, and to entrust management to professional asset management organizations. A bill has already been prepared following discussions within the party's policy bodies. The representatives who initially proposed this include Chairperson Han Jeong-ae and Senior Vice Chairperson Ahn Do-geol of the Future Economic Growth Strategy Committee, which outlines the next government's policies.
The proposed amendment to the Worker Retirement Benefits Security Act, introduced by Representative Ahn on the 23rd, includes provisions to transition retirement pensions from the current contract type to a funded type and mandates that professional asset management organizations conduct diversified investments. Representative Ahn estimates that if this system is implemented, the reserves will increase to 1,276 trillion won by 2030, and the retirement income per contributor will rise from the current 63.72 million won to 127.03 million won.
Representative Ahn estimates that management revenue rates could be increased to above 5%. The relevant bill was proposed after expert discussions within the financial division of the Future Economic Growth Strategy Committee. It is said that during the review process of the strategy committee, there was consensus on establishing multiple professional asset management organizations to facilitate competition in stability and revenue rates.
Representative Han has already introduced a bill related to funding last August. The core of the proposal is to allow the National Pension to participate as a funded retirement pension provider for "business sites with more than 100 full-time employees." For businesses with fewer than 100 employees, the Korea Workers' Compensation and Welfare Service is to manage and operate funded retirement pensions. Lee Han-joo, head of the Democratic Party's election committee, recently said during a retirement pension discussion hosted by Representative Han, "If the Democratic Party comes to power and the new government takes office, we will ensure that a plan to address the issues of the current retirement pension is implemented."