Korea Investment & Securities to Offer Government Bonds Through Retirement Accounts; 10-Year Bonds Return 6% Annually

[Financial News] Korea Investment & Securities Co., Ltd. is launching sales of government bonds for individual investors through retirement pension accounts. It aims to tap demand from investors seeking to build stable retirement assets by combining the tax benefits of pension accounts with the long-term compounding effect of government bonds. A subsidiary of Korea Investment Holdings, Korea Investment & Securities Co., Ltd. said on the 11th that it would accept subscriptions for government bonds for individual investors through individual retirement pension (IRP) and defined contribution (DC) accounts through the 17th.
Government bonds for individual investors pay the principal and interest in a lump sum at maturity, with returns calculated at an annual compound rate based on the coupon rate plus an additional rate. A key feature is that investing through IRP and DC accounts allows investors to take advantage of tax credits, tax deferral and low-rate separate taxation available through retirement pension accounts.
Investors can choose between 10-year and 20-year maturities. The minimum subscription is 100,000 won, making small investments possible. Investors can put in up to 100% of their accumulated balance, but the actual amount allocated may be less than the amount subscribed, depending on the monthly issuance limit announced by the Ministry of Economy and Finance.
The coupon rate for this issuance is 4.155% per year for both the 10-year and 20-year bonds. An additional rate of 0.630% applies to the 10-year bonds and 0.790% to the 20-year bonds. Korea Investment & Securities said that investors holding the bonds to maturity can expect cumulative returns of around 59.6% on the 10-year bonds (an average annual return of 6.0%) and 162.6% on the 20-year bonds (an average annual return of 8.1%).
Early redemption is available starting in the 13th month, after one year has passed since subscription. However, early redemption does not include the additional rate or the benefit of compounding; interest is paid at the coupon rate, calculated on a simple-interest basis. As the product is designed for long-term holding, investors should choose a maturity with their investment horizon and funding plans in mind.
An event is also being held for subscribers. Among customers who subscribe to the government bonds for individual investors and are allocated at least 100,000 won, 2,026 will be selected in a draw to receive a mobile gift certificate worth 10,000 won. Details of the subscription and event are available at Korea Investment & Securities branches and through its mobile trading system (MTS).
Choi Jong-jin, head of the Pension Innovation Division at Korea Investment & Securities, said, "If held to maturity, these newly issued government bonds offer the prospect of an additional rate and annual compounding, making them a long-term investment alternative for pension investors who are wary of losing principal." He added, "We expect a portfolio that includes performance-linked risk assets such as equity funds or exchange-traded funds (ETFs) to serve as a buffer, reducing asset volatility and protecting the target rate of return."

[email protected] Kang Jung-mo Reporter