Competition to attract severance funds from KT leavers heats up

KT CI

The competition among financial institutions is intensifying to attract severance funds from KT Corp. employees participating in a voluntary departure program.

According to banking sector sources on Tuesday, KT’s program includes around 6,000 employees, with applications open until November 4th, 2024. Those approved for departure will receive their severance payments by November 21st.

KT is offering a special severance package of up to 430 million won ($310,450). Together with standard severance pay, banks expect a significant influx of funds, estimated at 300 billion to 400 billion won. “Standard severance payments can be deposited into individual retirement pension (IRP) accounts with any of 16 financial institutions, including banks, securities firms, and insurance companies. Special severance pay can also be directed to these IRP accounts, or pension savings accounts at eight securities firms. Even capturing part of these funds would be substantial,” a commercial bank official said.

In response, banks are intensifying efforts to retain KT leavers’ funds by deploying dedicated advisors, distributing customized proposals, and producing exclusive informational guides.

Shinhan Bank has formed a KT-focused team within its pension solutions department. During the promotion period, employees who deposit severance payments into a Shinhan IRP account and enroll in pension products will receive incentives such as gift certificates. Shinhan is also providing high-value customers with investment advisory services and tax-saving consultations.

Likewise, Hana Bank has deployed KT-dedicated advisors across its branches nationwide, coordinating with teams specialized in IRPs and post-management. KB Kookmin Bank is creating a pension guide tailored for KT employees and is planning seminars as well as on-site presentations. Woori Bank is also preparing a customized guide for KT employees, offering mobile consultation services and waiving fees for new non-face-to-face IRP accounts.

Banks’ aggressive approach to securing KT’s severance and pension funds reflects concerns about potentially losing market share to securities firms, as new rules on transfers between pension accounts allowing for unrestricted movement of funds between institutions take effect Thursday.

According to the Financial Supervisory Service, pension reserves managed by pension providers totaled approximately 400 trillion won in the third quarter of 2024, with banks holding over half of the amount, or around 210 trillion won. Until now, moving pension funds required account cancellation, which disrupted compounding benefits and created inconvenience, limiting the number of transfers. The new rule eliminates these restrictions, encouraging consumers to seek better returns and intensifying the competitive push between banks aiming to retain customers and securities firms looking to win them.

In 2024 to date, securities and insurance firms have outperformed banks in pension accounts thanks to a strong stock market. Recent data from the Financial Supervisory Service shows that returns varied by up to 13 percentage points across providers, with smaller pension funds at regional banks and securities firms achieving relatively high returns due to their agility in market-sensitive investments.