"While Deposits Sat Idle, Returns Soared 66%"... Retirement Pension Yields Widen by a Factor of 20

[Financial News] Backed by a stock market rally in the second quarter of this year, both assets under management and returns in the retirement pension market surged sharply. Defined Contribution Retirement Pension (DC) and Individual Retirement Pension (IRP) accounts, where subscribers directly invest in risky assets, posted record-breaking performance, with returns on principal-unprotected, performance-linked products climbing above 60%.
According to a retirement pension comparison disclosure released by the Financial Supervisory Service on the 23rd, the one-year return on principal-unprotected DC accounts at securities firms ranged from 34% to 66% in the second quarter. That was roughly 10 times higher than the same period last year, when returns were stuck in the single digits, or around 4% to 8%.
By firm, iM Securities ranked first in DC returns at 66.24%, followed by Hyundai Motor Securities at 66.12%, KB Securities at 60.13%, NH Investment & Securities at 56.65%, Samsung Securities at 56.03%, Shinhan Investment at 55.99%, and Mirae Asset Securities at 50.41%. Most major securities firms delivered overwhelming results in the 50% to 60% range. IRP principal-unprotected returns also ranged from 40% to 55%, led by Hana Securities at 54.91% and KB Securities at 52.98%.
The main driver behind these high returns was the sharp rise in stock-related assets and semiconductor exchange-traded funds (ETFs). As shares of semiconductor heavyweights such as Samsung Electronics and SK hynix, as well as semiconductor materials, parts and equipment companies on the KOSDAQ, jumped sharply, investors holding related ETFs booked large unrealized gains in a short period. U.S. S&P500 index ETFs, which are popular among individual investors, also rose about 15% to 17%, providing solid support for the lower end of returns.
By contrast, investors who kept their money in principal-guaranteed accounts such as deposits saw returns remain in the 2% to 3% range, roughly in line with commercial bank deposit rates. Principal-guaranteed defined benefit plans, which are managed by companies, also posted only 2% to 3% returns, widening the gap with performance-linked products to as much as 20 times.
Retirement pension assets hit a record 553 trillion won, but experts warn against overreading short-term gains
Fueled by the stock market boom, money flowing into retirement pensions also accelerated. Total assets held by 43 retirement pension providers in Korea, including securities firms, banks and insurers, rose by about 45 trillion won from the previous quarter's 508.7341 trillion won to a record 553.8779 trillion won in the second quarter.
In particular, DB plan assets, which are managed by companies, increased by only about 238 billion won. By contrast, DC and IRP assets, which reflect stronger individual investment preferences, jumped by 20.1399 trillion won and 22.618 trillion won, respectively, driving the overall inflow of funds. Assets held by securities firms alone climbed from 141 trillion won in the first quarter to 165 trillion won in the second quarter, absorbing about half of the new inflows.
However, market experts caution that the unusually high returns in the second quarter should not be mistaken for a long-term average.
“The second-quarter performance included an optical illusion created by the sharp rally in the stock market, led by specific sectors such as semiconductors,” said an official in the financial investment industry. “As market volatility may expand from the third quarter onward, pension management strategies should focus on asset diversification and long-term risk management rather than chasing short-term returns.”
[email protected] Moon Young-jin Reporter