Korea's retirement pension reserves grew by more than 50 trillion won in the first half of this year alone. The increase came as defined-contribution (DC) plans and individual retirement pensions (IRP) surged, while defined-benefit (DB) plan reserves turned lower for the first time on a half-year basis. Analysts say the entrenched DB-centered structure of the retirement pension market has been upended as those born in the 1970s and 1980s, generations familiar with financial investing, have moved into their 40s and 50s.
According to the Financial Supervisory Service's integrated pension portal on the 20th, total retirement pension reserves held by Korea's 43 retirement pension providers (excluding the Korea Workers' Compensation and Welfare Service) reached 553.9 trillion won in the first half of this year. That marks an increase of 57.1 trillion won, or 11.5%, from 496.8 trillion won at the end of last year. The pace is steep, considering that retirement pension reserves rose 69.6 trillion won last year compared with 2024.
In the first half of this year, the decline in DB plans and the growth in DC plans and IRP were especially pronounced. In DB plans, the company is responsible for managing the reserves, while in DC plans and IRP, subscribers select products and issue investment instructions directly from their own accounts.
DB plan reserves fell 4.7 trillion won to 224.2 trillion won from 228.9 trillion won at the end of last year. It was the first half-year decline in DB plan reserves. Analysts interpret the drop in DB reserves—at a point when the seasonal factor of reserves shrinking around the year-end and new year had been offset—as a sign that real demand for DB plans has fallen among office workers.
As a result, the share of DB reserves in total reserves plunged from 46.1% to 40.5%. The DB share, which accounted for a majority at 53.7% as recently as 2023, fell below half for the first time in 2024 (49.7%) and has since declined by a widening margin each year. If this trend continues, forecasts suggest the share could break below the 40% line this year.
DC plan reserves, by contrast, rose 26.3 trillion won to 163.3 trillion won as of the end of the first half, from 137 trillion won at the end of last year. IRP reserves grew 35.4 trillion won over the same period, from 130.9 trillion won to 166.3 trillion won. Combined, DC plans and IRP added 61.7 trillion won in the first half alone, a figure 21.5% larger than last year's increase of 50.8 trillion won.
Observers say a culture of managing one's own retirement assets directly, rather than entrusting severance funds to a company, has taken hold. DB plans are generally invested mainly in principal-and-interest-guaranteed products, with long-term returns of just 2% a year, lower than market interest rates. DC plans and IRP, meanwhile, allow up to 70% of the total amount to be invested in equity assets. Because pension assets are by nature invested over a long horizon, allocating them to a stock market that trends upward over time can yield returns far higher than deposits and savings.
The shift in retirement pension management culture is also clearly reflected in the breakdown of reserves by industry sector. The share of securities firms in total provider reserves rose 3.3 percentage points to 29.8% at the end of the first half, from 26.5% at the end of last year. The shares of insurers (19.4%) and banks (50.8%) fell 1.7 percentage points and 1.6 percentage points, respectively. Analysts attribute this to a growing number of office workers moving their retirement pension accounts to securities firms, where real-time trading of exchange-traded funds (ETFs) is possible, following the introduction of the retirement pension in-kind transfer system.
Who attracted more DC and IRP customers also affected the ranking of retirement pension providers. As of the end of the first half, Shinhan Bank held the largest amount of subscriber reserves at 58.9 trillion won, overtaking Samsung Life Insurance (57.3963 trillion won) for the top spot. Samsung Life had firmly maintained the No. 1 position since the retirement pension system was introduced in 2005, but the reserve gap narrowed each year until it was finally overtaken by Shinhan Bank.
About 76% of Samsung Life's retirement pension reserves are in DB plans, capping the upside for reserve growth, whereas about 69% of Shinhan Bank's reserves are in DC plans and IRP, fueling rapid growth. Mirae Asset Securities recorded 52 trillion won in reserves on the back of explosive growth in DC plans, becoming the only securities firm to join the "50 trillion won reserve club."
"With the stock market performing well in the first half of this year, it appears many office workers switched from DB to DC plans," an FSS official said. "In particular, as those born in the 1970s and 1980s—the largest population cohorts—have entered their 40s and 50s, the investment sensitivity of pension assets has risen dramatically."
