Retail government bonds open to retirement pension accounts starting Wednesday

Shinhan, Hana Bank sell 10-, 20-year bonds — minimum 100,000 won

Tax deferral, pension income tax benefits — compound interest lost on early redemption

Shinhan Bank and Hana Bank.
Shinhan Bank and Hana Bank.

Retirement pension account holders can now invest in retail government bonds starting Wednesday. Bank customers with defined contribution (DC) and individual retirement pension (IRP) accounts can now put their reserves into 10-year and 20-year government bonds. This widens the options for conservative, long-term investors who had mostly relied on time deposits. Banks expect the move to draw in retirement pension customers who favor long-term, stable products.

According to industry sources, Shinhan Bank and Hana Bank began selling retail government bonds through DC and IRP accounts starting Wednesday. The initial subscription period runs through Sept. 15, and customers can purchase 10-year and 20-year bonds starting from a minimum of 100,000 won ($75), in increments of 100,000 won.

Shinhan Bank built its system so customers can subscribe directly through their existing DC and IRP accounts, without opening a separate account dedicated to retail government bonds. Subscriptions can be made through the bank's mobile app, Shinhan SuperSOL, or at branches.

The bank is also running an event to mark the first subscription round. Among customers who are allotted bonds after subscribing, 700 will be selected by lottery to receive mobile coffee coupons. Of those, 400 customers who subscribed at least 100,000 won will receive one coupon each, and 300 customers who subscribed at least 3 million won will receive two coupons each.

Hana Bank also began selling 10-year and 20-year retail government bonds through DC and IRP accounts the same day. Retail government bonds are issued on the 20th of every month. In September, subscriptions can be made at branches, and starting in October, customers will also be able to subscribe remotely through the bank's mobile app, Hana One Q.

Retail government bonds are savings-type government bonds issued to help individuals build long-term assets. Bondholders who hold them to maturity receive annual compound interest based on the coupon rate plus an additional rate.

Produced using ChatGPT
Produced using ChatGPT

Using a retirement pension account defers taxation on interest earned until the funds are withdrawn. Account holders who receive their reserves as a pension after age 55 also benefit from the pension income tax rate and other existing tax advantages tied to retirement pensions. However, early redemption forfeits both the additional interest rate and the annual compounding benefit.

The new offering follows this month's expansion of eligible accounts for retail government bonds to include retirement pensions. Previously, investors had to open a separate account dedicated to retail government bonds, but as of Wednesday, they can purchase 10-year and 20-year bonds directly through DC and IRP accounts.

The initial providers are three banks — Shinhan Bank, Hana Bank and NH NongHyup Bank — and five securities firms: Mirae Asset, Samsung, Korea Investment & Securities, KB and NH Investment & Securities.

Banks say the new system allows them to offer retirement pension customers a new long-term, stable investment option beyond time deposits.

"IRP customers at banks tend to have a strong preference for long-term, stable products," a commercial bank official said. "Adding government bonds as an option alongside time deposits is a positive step because it broadens customer choice." The official added, "Since banks have had relatively limited retirement pension product lineups compared with securities firms, this should also help fill out our offerings."

Banks are expanding their retirement pension product lineups beyond retail government bonds as well. Hana Bank began selling a guaranteed-return performance insurance product dedicated to IRP accounts on Sept. 1. In evaluations of retirement pension operators, it became the first bank to be named an outstanding operator for three consecutive years.

Shinhan Bank's retirement pension reserves stood at 58.89 trillion won at the end of the second quarter of this year, ranking first among all retirement pension operators. The bank said it plans to keep strengthening its retirement pension product lineup and expert consulting capabilities, building on the launch of retail government bond sales.


rim@heraldcorp.com