[Edaily Marketin, Reporter JI YEONG-EUI ] Performance bonuses for 96 employees of the National Pension Service’s Fund Management Headquarters have been on hold for months due to a clash between the government and the National Pension Service over the interpretation of a single line in the regulations. This stems from the financial authorities suddenly taking issue this year with the phrase “investment professionals” regarding performance bonuses that have been paid for over a decade. As the tug-of-war over the interpretation of this long-standing regulation between government ministries and the National Pension Service drags on, it appears that the employees’ compensation has become the collateral damage.

Performance-based pay discrimination flagged by the Board of Audit and Inspection a decade ago… Recurring due to the Ministry of Planning and Budget’s obstinacy

According to investment banking (IB) industry sources and government officials on the 14th, the Ministry of Health and Welfare and the National Pension Service have been unable to reach an agreement

with the Ministry of Planning and Budget

for several months regarding the payment of investment performance bonuses to general staff in the Fund Management Headquarters and employees in the Compliance Support Office. The core of the conflict is Article 21 of the National Pension Fund Performance Evaluation and Compensation Guidelines. The guidelines stipulate that performance bonuses should, in principle, be paid to “investment professionals employed by the Fund Management Headquarters during the evaluation year.” Citing this wording, the Ministry of Planning and Budget has raised the issue, questioning whether it is appropriate for general staff at the Fund Management Headquarters and employees of the Compliance Support Office to receive the same investment performance bonuses.

The practice of paying performance bonuses to general staff began following a recommendation from the Board of Audit and Inspection. In 2011, the Board of Audit and Inspection pointed out that the Fund Management Headquarters had not paid investment performance bonuses to its general staff; the National Pension Service subsequently revised its internal regulations and has been paying performance bonuses to general staff since 2015. The government is now taking issue with this practice, which has continued for 10 years.

The Fund Management Headquarters’ operating regulations stipulate that annual performance bonuses be paid to “officers and employees working at the Fund Management Headquarters” and even specify separate performance evaluation criteria for general staff. The discrepancy between the Performance Evaluation and Compensation Guidelines cited by the financial authorities and the Corporation’s internal operating regulations is not a recent issue but one that has been neglected for quite some time.

Whether “investment professionals” can be narrowly defined as only those in investment roles who directly buy and sell assets is a separate issue. The very reason the Fund Management Division operates separately from the Corporation’s general administrative organization is to professionally carry out the investment and management duties of the National Pension Service, one of the world’s three largest pension funds. Even staff who do not make direct investment decisions are responsible for tasks that support the overall fund management, such as investment strategy, risk management, compliance, treasury management, and information systems. This is why critics argue that it is difficult to categorize certain employees as unrelated to investment performance simply because their job classification is “general staff.”

Furthermore, the performance bonus payment rate for general staff in the Fund Management Headquarters is explicitly set at “70% of the average payment rate for fund management staff.” The system also calculates individual composite scores to apply grades based on job category and rank, with varying differentials applied. In other words, general staff do not receive the exact same performance bonus rate as fund management staff.

Why now, after more than a decade…? Conflict ignited by increased performance bonuses

The reason financial authorities have belatedly begun to question the eligibility criteria lies in growing concerns over the significantly expanded scale

of performance bonuses

. Last year, the National Pension Service recorded a record-high return of 18.82%, generating 231.6 trillion won in investment income. Coupled with the expansion of the performance bonus calculation basis from the total base salary to 1.5 times the total base salary, the amount of performance bonuses paid to investment staff this year has also increased significantly.

The Ministry of Strategy and Budget believes that market conditions—such as the strong exchange rate and rising domestic and international stock markets—played a significant role in the National Pension Service’s high return on investment. The ministry takes the position that compensation should place greater emphasis on how much excess return was generated above the benchmark (BM), rather than broadly attributing market gains to the performance of investment managers. This implies that the performance compensation standards—which were significantly expanded just last year to attract top talent and encourage long-term service—must be reevaluated after only one year.

The Planning and Budget Office pointed out that the review conducted by the fiscal authorities (the Ministry of Economy and Finance) at the time was flawed. Kim Geon-min, head of the Fund Management Planning Division, stated, “The section chief in charge at the Ministry of Economy and Finance made a mistake back then,” adding, “He has admitted to the error himself—he failed to verify the cap on performance bonuses.” He further noted, “Setting aside the mistake, the payments were made to investment managers because the regulations permitted it.” The explanation is that even if the government failed to sufficiently assess the effects of expanding performance-based bonuses in advance, the payment of performance-based bonuses to investment staff had to proceed as planned in accordance with the already established regulations.

Section Chief Kim emphasized, “Matters related to salaries and performance bonuses are thoroughly scrutinized by the Board of Audit and Inspection every four to five years,” adding, “The Board of Audit and Inspection would not approve of ignoring these regulations.” He argued that even if performance bonuses had been paid to general staff and others as a matter of practice over the past decade, since there is room to interpret that they do not qualify under current guidelines, this cannot be tolerated.

Is the Government Shifting the Blame for Its Administrative Mistakes onto Pension Fund Employees?

The issue is that dissatisfaction with the size of the performance bonuses and the question of who qualifies for them are separate matters. If the current level of performance bonuses is deemed excessive, the calculation formula, the weighting of benchmarks, and the payment cap can be renegotiated. However, critics point out that this is a different matter altogether: after the government and the Fund Management Committee expanded the compensation system last year—following sufficient discussion—on the grounds of attracting and retaining top talent, it is now blocking payments to employees who have received performance bonuses for the past 10 years simply because the total payout exceeded expectations. In particular, indefinitely withholding compensation from employees who have already completed their performance evaluations according to existing standards could result in shifting the burden of the system change onto the employees themselves.

The National Pension Service’s decision last year to raise the performance bonus calculation standards was also a measure taken in light of the reality that it must compete with private financial firms to secure talent in Jeonju, which is geographically distant from Seoul’s financial hub. This is why there are concerns that shaking up the compensation standards just one year after the system was implemented could undermine not only compensation competitiveness but also the predictability of policy.

A professor of economics pointed out, “If there is a problem with the regulations, they should either clearly revise the eligibility criteria to prevent future controversy or reopen discussions on revisions.” He added, “After paying bonuses in the same manner for 10 years, for the government and the Fund to argue over the interpretation of a single sentence and freeze the payments of employees who have already completed their performance evaluations could be seen as a classic example of armchair bureaucracy.”

An official forum to resolve the issue of unpaid performance bonuses will convene soon. Following the National Pension Fund Management Evaluation Committee meeting on the 16th, the Fund Management Committee—the highest decision-making body—is scheduled to meet on the 20th. If the Ministry of Health and Welfare and the National Pension Service discuss a plan to clarify the eligibility criteria in the Performance Evaluation and Compensation Guidelines, this could provide an opportunity to resolve the regulatory conflict that has been left unaddressed for a decade.

It is assessed that if general staff and compliance personnel are to continue to be included in the operational performance bonus system, specifying the eligible recipients in the guidelines could eliminate room for interpretation. Conversely, even if a different payment system is adopted, it will be necessary to clarify the effective date and transitional measures regarding payments already made. It has been pointed out that, regardless of the approach taken, this is an issue that the government and the National Pension Service must resolve through official decision-making procedures; it is not a matter that justifies continuing to withhold performance bonuses from employees who have already been evaluated, simply because of systemic inconsistencies that have come to light belatedly.