[Financial News] Last year, the annual return rate of pension savings fell to 3%, down from the previous year, while pension savings fund returns exceeded 7%. The fund reserves increased by over 11 trillion KRW.
On the 31st, the Financial Supervisory Service announced through the “2024 Pension Savings Management Status” that the overall annual return rate of pension savings last year was 3.7%, a decrease of 0.9 percentage points (p) compared to the previous year’s 4.6%.
By product, the return rates were 2.6% for pension savings insurance, 5.6% for pension savings trusts, and 7.6% for pension savings funds.
The difference in return rates between products is due to their structures. Pension savings insurance subtracts fees from the premium paid and applies the declared interest rate set by each insurer, whereas pension savings funds are directly managed by subscribers through selected funds and are linked to stock market returns.
The return rate for pension savings funds was even higher than that of retirement pensions IRP (5.9%). This is because unlike pension savings funds, which can invest 100% of their reserves in performance-based products, IRP can invest only up to 70%.
The total reserves of pension savings amounted to 178.6 trillion KRW, an increase of 10.8 trillion KRW (6.4%) from the previous year.
By product, the reserves were 115.5 trillion KRW for pension savings insurance, 40.4 trillion KRW for pension savings funds, 14.7 trillion KRW for pension savings trusts, and 8 trillion KRW for pension exemption insurance.
Last year, the increase in reserves for pension savings funds was 11.1 trillion KRW, surpassing the total increase. In contrast, pension savings insurance increased by 1 trillion KRW and pension savings trusts decreased by 7 trillion KRW.
By seller, the reserves were 115.6 trillion KRW for insurance companies, 35.9 trillion KRW for financial investment companies, 19.1 trillion KRW for banks, and 8 trillion KRW for mutual aid organizations. The reserves in financial investment companies increased by 10.9 trillion KRW (43.7%) from the previous year, while insurance companies only increased by 2 trillion KRW (0.1%). Bank reserves decreased by 6 trillion KRW.
As of the end of last year, there were 7.642 million pension savings subscribers, an increase of 5.8% from the previous year.
In particular, as more people use pensions for long-term asset formation, subscribers under the age of 20 increased by 66% (88,000 people) from the previous year.
Based on earned income, the subscription rate for workers with annual incomes of less than 40 million KRW was only 1.5%, whereas it was 10.1% for those earning between 40 million and 60 million KRW, 22.6% for 60 million to 80 million KRW, 34.6% for 80 million to 100 million KRW, and 50.7% for over 100 million KRW, showing that the higher the income, the higher the subscription rate.
The average annual pension payment per contract was 2.95 million KRW, which is 20,000 KRW less than the previous year (2.97 million KRW).
The Financial Supervisory Service advised, “Pension savings offer various advantages such as tax benefits, low fee costs, and unlimited asset management. It is important to consider active investment for a prosperous retirement. Starting early, saving a lot, and receiving benefits over a long period are key.”