Korea to make employers adopt private pension plans
04 September 2014
Category: News, Asia, Global, Korea
By Maya Ando
Korea is planning to implement new measures that will force all local companies to enrol employees in private pension plans by 2022, on the back of an expected surge in welfare payments due to a rapidly ageing population.
According to government data, 1.42 million companies will be required to adopt the new mandatory rules, which were jointly announced by the Ministry of Strategy and Finance and two other government agencies.
Deputy Finance Minister Jeong Eun Bo said that the new measures could more than double the size of privately-managed pension funds to 170 trillion won (US$168 billion) by the end of the decade, from 80 trillion won at the end of 2013.
The measure will first apply to companies employing more than 300 staff, which will be required to join the new pension system by the start of 2016.
To date, there are 1.68 million companies that are obliged to adopt the pension scheme, but only 15.6% of them have so far signed up.
The plan will allow asset management companies to invest pension reserves into riskier assets in order to meet future pension liabilities. According to data released by the finance ministry, approximately $86.27 billion of retirement pensions were invested in financial assets as of June 2014.