Nearly 500 Trillion Won Has Accumulated, but Retirement Income Remains Uncertain... A Fund Twice as Large Still Leaves Wallets Uneasy

[Financial News] 501.4 trillion won. That is the amount accumulated in Korea’s retirement pension system. At first glance, the figure suggests that preparations for retirement are fairly solid. But the picture changes when the performance is examined. The average return over 10 years was 2.64%, while only 16.5% of the funds were received as pensions. Although the reserves have grown, the path toward a monthly “paycheck” after retirement remains narrow.
At the “First 2026 KCMI Issue Briefing” held on the 4th at the Korea Capital Market Institute in Yeouido, Seoul, the gap between the retirement pension system’s growth in size and its ability to secure retirement income came under scrutiny. Nam Jae-woo, a senior research fellow at the Korea Capital Market Institute, spoke on “Reforming the Retirement Pension System for Multilayered Retirement Income in a Super-Aged Society.” He stressed the need to shift toward long-term, diversified investment and strengthen the responsibility of institutions managing participants’ money.
Retirement pension reserves rose 96.2%, from 255.5 trillion won at the end of 2020 to 501.4 trillion won at the end of 2025. Although they nearly doubled in five years, 75.4% of the total reserves remain concentrated in principal-and-interest-guaranteed products.
Nam said, “It is difficult to conclude that the system’s ability to secure retirement income has improved simply because its size has grown.” He added, “Considering inflation and living expenses over the long period after retirement, it is impossible to accumulate sufficient pension assets through a savings practice centered solely on principal-and-interest-guaranteed products.”
Investment performance also varied by product type. The overall return on retirement pensions last year was 6.5%. Performance-linked products posted 16.8%, while principal-and-interest-guaranteed products remained at 3.1%. Target-date funds (TDFs), which adjust asset allocations according to the retirement date, recorded a 13.7% return.
Nam noted that last year’s results reflected the impact of a strong capital market and placed greater emphasis on long-term asset allocation than on short-term returns. He explained, “We need to shift the perspective on retirement pension management from saving to long-term investment.” He added, “Risks should be managed through a globally diversified portfolio spread across assets and regions.”

He identified reform of default options, or the pre-designated investment management system, as a task needed to support this shift in investment practices. The system was introduced so that reserves would continue to be managed even when participants do not provide investment instructions. However, analysts say the current structure, which requires participants to select a product, makes it difficult to resolve the problem of funds remaining in low-return products. Default-option reserves increased to 53.3 trillion won, but stable products accounted for 85.4%, and the overall return was only 3.69%.
Nam said, “The current opt-in structure, in which participants must choose a product again, has significant limitations.” He added, “The pre-designated investment management system should be reformed into a genuine automatic management system centered on TDFs and target-risk funds (TRFs).”
As an alternative, he proposed strengthening an opt-out approach that would automatically allocate the assets of participants who have not selected a separate investment product to a long-term asset-allocation portfolio. Participants would still be able to choose another method if they wished, but the default management route would be designed to ensure long-term diversification even without a separate selection.

He also argued that the system responsible for managing the funds must be reformed alongside changes in investment practices. In a fund-based system, retirement pension reserves are pooled and managed professionally. Here, securing independent decision-making and expertise should take priority over simply expanding the fund’s size.
Nam said, “A fund-based system is not simply a system for pooling reserves and increasing the scale of management.” He emphasized fiduciary responsibility that prioritizes participants’ interests. He explained that the system needs governance in which professional management, conflict-of-interest controls, and long-term performance evaluations can function effectively.
He also distinguished the design and evaluation criteria for each type of fund. Public funds should focus on closing coverage gaps and guaranteeing benefit rights for small and micro-sized businesses and vulnerable groups. Nonprofit alliance funds should focus on sustaining solidarity among companies and expanding the system. For open financial-institution funds, he proposed evaluating performance based on long-term returns adjusted for risk while leveraging the private sector’s management capabilities.
However, he expressed opposition to the National Pension Service (NPS) entering the public retirement-pension market. He said it would be difficult for the NPS to establish a clear distinction from the existing public fund, “Pureun Seed,” operated by the Workers’ Compensation and Welfare Service, in terms of returns and management costs. He also noted that concentrating the management of public and private pensions in a single institution would be undesirable from the standpoint of risk diversification.
Alongside the introduction of fund-based pensions, he called for improvements to the management of the existing contract-based system. For defined-benefit (DB) plans, he proposed asset allocation that takes future retirement-benefit payment obligations into account, along with discretionary management by professional institutions. For defined-contribution (DC) plans, he proposed strengthening the effectiveness of default options.
Nam emphasized, “The ultimate goal of reforming the retirement pension system is to establish a structure in which reserves are converted into stable pension benefits through the expertise of financial institutions and strict fiduciary responsibility.”
[email protected] Choi Doo-sun Reporter