KEF: Mandatory external funding of retirement benefits should be phased in with small and micro businesses in mind

[Financial News] In response to the Ministry of Employment and Labor’s announcement on the 29th of its “Plan to Strengthen the Retirement Pension System,” centered on mandatory external funding of retirement benefits and the introduction of a fund-type retirement pension system, the Korea Enterprises Federation (KEF) said that implementation should be phased in with small and micro businesses in mind, and that policy support was needed.
In a commentary issued that day, KEF took issue with the mandatory external funding of retirement benefits, saying it was “a measure that effectively makes the introduction of retirement pension plans mandatory at all worksites.”
KEF expressed support for the policy’s aims, saying, “We hope this plan will guarantee the right to receive retirement benefits and expand choices in managing retirement pensions, thereby making a tangible contribution to securing retirement income.”
At the same time, it noted that the financial circumstances of small and micro businesses and the burden of operating the system must be fully taken into account. KEF stressed, “Implementation should be more carefully phased, with policy support provided.”
KEF also raised concerns about fund-type retirement pensions. It explained that, unlike the National Pension, whose payouts are guaranteed by the state, any gains or losses resulting from the performance of fund-type retirement pension investments accrue entirely to subscribers. Accordingly, rather than fostering excessive expectations about improving returns, sufficient institutional safeguards should be put in place to manage investment risks and protect subscribers.
The National Pension Service’s participation in fund-type retirement pension business also came under scrutiny. KEF noted that the Korea Workers’ Compensation and Welfare Service’s Small and Medium Enterprise Retirement Pension Fund System (“Pureun Seed”) was already in operation. It warned that if the National Pension Service also entered the business, the division of roles between public and private pensions could become blurred, potentially undermining fair competition and the sound development of the retirement pension market. KEF said, “Careful consideration is needed.”
The Ministry of Employment and Labor announced the plan that day, together with the Ministry of Economy and Finance, the Financial Services Commission and the Financial Supervisory Service, following consultations with the National Assembly’s Climate, Energy, Environment and Labor Committee and government-ruling party talks. The plan calls for mandatory external funding of retirement benefits at all worksites by 2030 and would allow private financial institutions to participate in fund-type retirement pensions.
[email protected] Kim Dong-chan Reporter