“Pensionization Incentives must be strengthened”[ESF2025]

⑤says Dong-yeop Kim, Managing Director at
Mirae Asset Investment and Pension Center
“Building a financial reservoir for old age is essential”
both ‘incentives’ and ‘regulatory measures’ are needed

[Jiyu Kong, Edaily Reporter] “For retirement pensions to truly guarantee post-retirement income, it’s crucial to encourage annuitization - receiving benefits as a pension rather than a lump sum. We need a system that not only restricts early withdrawals but also provides incentives for drawing benefits as an annuity.”

As Korea enters a super-aged society, the importance of preparing for post-retirement income gaps is growing. Interest in managing retirement pensions is also on the rise. In a recent interview with Edaily, Dong-yeop Kim, Managing Director at Mirae Asset Investment and Pension Center, emphasized the need to build a personal “retirement fund pocket” and consistently accumulate financial resources. He is scheduled to speak at the Edaily Strategy Forum on June 18-19, where he will discuss strategies for managing retirement assets.

Dong-yeop Kim, Managing Director at Mirae Asset Investment and Pension Center (Photo by Tae-hyung Kim)

“Retirement pension has now become a ‘Visible Asset’”

The retirement pension system, introduced in December 2005, marks its 20th anniversary this year. The market size is now estimated to exceed 400 trillion KRW. “Most of the first baby boomer generation (born 1955~1963) are now receiving pensions, and many in the second wave (born 1964~1974) are approaching retirement,” Kim explained. “As more people around us start receiving pensions, interest in retirement planning is naturally increasing.”

He added, “Younger generations are also increasingly using retirement pensions as investment assets. Thanks to advances in IT, people can now manage their pensions directly from their smartphones, transforming pensions from ‘invisible assets’ to ‘visible assets,’ which has also influenced their growing interest.”

Recently, there has been growing interest in individual retirement pensions(IRPs) and pension savings accounts. Subscribers can save up to 18 million KRW annually across both IRPs and pension savings, with up to 9 million KRW eligible for tax deductions. Kim advises, “If you have the financial capacity, it’d wise to maximize your annual tax deduction limit. What matters most is consistent saving within your capacity.”

Dong-yeop Kim, Managing Director at Mirae Asset Investment and Pension Center (Photo by Tae-hyung Kim)

“Pensionization Incentives are necessary”

Investing in overseas exchange-traded funds (ETFs) through retirement and pension savings accounts is also becoming more popular. “In a highly volatile market like today, frequent trading can lead to significant losses,” Kim cautioned. “As your investment allocation increases, so does volatility, and this should be taken into account.”

He further stated, ”It is advisable to allocate 60?70% of pension assets to Target Date Funds(TDFs) and invest 20?30% in ETFs and other similar assets.“ TDFs are life-cycle financial products that automatically adjust allocations between domestic and international stocks and bonds based on the investor’s expected retirement date. “You should also consider your human capital value and adjust the balance between stocks and bonds in your pension assets according to your life stage,” Kim added.

With growing concerns about the depletion of the National Pension Fund, Kim stressed the need for qualitative growth in retirement pensions. “If public pensions alone can’t sustain society, we need to incentivize private pensions so that people can build their own retirement assets. This will also allow the government to focus more support on low-income groups,” he stated.

The government is working to encourage retirees to receive their pensions as annuities by tightening early withdrawal requirements. Kim advised that in addition to these regulatory measures, incentive-based approaches are also necessary. He emphasized, ”It is important to enhance benefits, such as introducing a tax-free system for pension withdrawals in retirement, to encourage long-term financial security.“

About Dong-yeop Kim…

△Bachelor’s in Political Science and Diplomacy, Yonsei University △Master’s in Real Estate Management, Konkuk University △Director, Korean Pension Association, △Managing Director, Mirae Asset Investment and Pension Center

공지유 (noticed@edaily.co.kr)