Ministry of Employment and Labor, FSS hold meeting with nine banks, insurers and brokerages

FSS orders stronger internal controls to prevent conflicts of interest in fund-type retirement pensions

Labor Ministry to consult National Assembly on retirement benefit law amendment bill due this month

Employment and Labor Minister Kim Young-hoon delivers a welcoming address before announcing a joint declaration by a labor-management-government task force on strengthening retirement pension functions at the Kensington Hotel in Yeouido, Seoul, on Friday. [Yonhap]
Employment and Labor Minister Kim Young-hoon delivers a welcoming address before announcing a joint declaration by a labor-management-government task force on strengthening retirement pension functions at the Kensington Hotel in Yeouido, Seoul, on Friday. [Yonhap]

As the government moves to require all workplaces to hold retirement benefits in external reserves by 2030, retirement pension providers have called for a public-private support system to help small businesses adopt the regime. The Financial Supervisory Service has also ordered financial firms seeking to participate in fund-type retirement pensions to strengthen internal controls to prevent conflicts of interest and put members' interests first.

South Korea's Ministry of Employment and Labor and the Financial Supervisory Service held a meeting with retirement pension providers Friday at the Royal Hotel in Jung-gu, Seoul, co-chaired by Employment and Labor Minister Kim Young-hoon and FSS Governor Lee Chan-jin. Nine financial institutions attended, including the Korea Workers' Compensation and Welfare Service, Hana Bank, Shinhan Bank, KB Kookmin Bank, Woori Bank, Samsung Life, Hanwha Life, Kyobo Life, Mirae Asset Securities and NH Investment & Securities.

The meeting focused on implementing the government's "Plan to Strengthen Retirement Pension Functions," announced Oct. 29. The plan has two main pillars: requiring retirement benefits to be held outside the workplace to prevent unpaid wages, and expanding fund-type retirement pensions managed by professional trustee corporations.

Kim asked financial firms to guide small businesses new to retirement pensions on when and how to enroll and begin contributions. He also urged them to fully explain the difference between annuity and lump-sum payouts to members nearing retirement and to offer a wider range of pension products. "The cooperation of retirement pension providers is essential for the hard-won agreement among labor, management and government to work properly on the ground," Kim said.

Financial firms called on the government and the industry to jointly support small businesses in adopting the system. They also requested sufficient preparation time ahead of fund-type retirement pension licensing and asked that laws and regulations be revised to allow a broader range of pension products.

FSS Governor Lee urged firms to "strengthen internal control systems befitting trustee responsibilities and work to establish a sound business order that puts members' interests first" to ensure the smooth rollout of fund-type retirement pensions. The FSS proposed measures to prevent affiliated-company products from receiving undue preference in selection procedures and follow-up reviews, and to require transparent disclosure so members can compare investment performance, risk and costs.

The Labor Ministry plans to consult with the National Assembly to expedite passage of an amendment to the Act on the Guarantee of Workers' Retirement Benefits, which is set to be introduced this month. Before the mandatory external reserve requirement takes effect, the ministry will also gather input from small businesses and review on-site support systems.


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