[Edaily Reporter PARK JONG-HWA ] Retirement pension reserves held by retirement pension providers have fallen by nearly 12 trillion won in just three months. This marks the first decline in six years since 2020. In particular, reserves in products that do not guarantee principal and interest have fallen sharply. This is interpreted as the result of mounting investment losses due to the continued slump in the stock market since the second half of the year.

According to the Financial Supervisory Service, the total balance of retirement pension reserves held by 42 retirement pension providers in the third quarter stood at 542.1214 trillion won, a decrease of 11.7565 trillion won from the previous quarter (553.8779 trillion won). This marks the first time in about six years—since the first quarter of 2020, when investment losses from the COVID-19 pandemic coincided with a wave of early withdrawals for real estate investments—that the total retirement pension fund balance has declined.

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Experts note that while factors such as early withdrawals and product changes are also reflected in the change in fund balances, they view the significant increase in unrealized investment losses—driven by the stock market’s repeated sharp fluctuations in the second half of the year—as the primary cause of the decline. The KOSPI index, which had risen to 9,385 in June, fell to the 5,450 level last week. Investors who poured their retirement pension funds into ETFs and other vehicles in pursuit of high returns face a high risk of significant losses. Kim Byung-chul, CEO of the Korea Pension Development Institute, said, “When the stock market was doing well, many people invested their retirement pensions in ETFs, but as the market declined, it appears that funds that had been concentrated in ETFs have either been withdrawn or have incurred losses.”

This trend is evident when examining the data by product type. Accumulated assets in non-guaranteed (performance-based) products—such as funds and ETFs—decreased by 12.5142 trillion won (6.3%) over three months, from 197.722 trillion won in the second quarter to 185.2078 trillion won in the third quarter. Among these, the decline in assets under management for Individual Retirement Pensions (IRP; -6.9308 trillion won) and Defined Contribution (DC) plans (-5.1456 trillion won) was particularly notable. In contrast, the balance of principal-and-interest-guaranteed products (combined deposit-type and market-based products), which are primarily composed of deposits and bonds, increased slightly (by 758 billion won).

Looking at the one-year weighted average return based on accumulated assets, the returns on non-principal-and-interest-guaranteed DC and IRP plans plummeted by 37.4 percentage points (53.3% → 15.9%) and 32.29 percentage points (48.3% → 16.0%), respectively, compared to the previous quarter. The returns on principal- and interest-guaranteed products fared relatively well, with deposit-type products decreasing by 0.03 percentage points and market-type products by 1.31 percentage points. However, in terms of three-year returns, guaranteed deposit-type products yielded 3.3% and guaranteed market-type products 1.2%, whereas non-guaranteed products yielded 13.9%, showing a significant difference. The 5-year returns also showed that non-guaranteed products outperformed guaranteed products by 3 to 6 percentage points.

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A similar pattern emerged in the trends of retirement pension reserves by provider, depending on the proportion of guaranteed and non-guaranteed products. By industry, retirement pension reserves declined most sharply in the securities sector (-2.9%). At Mirae Asset Securities alone, reserves plummeted by 2.1 trillion won from the previous quarter. This is interpreted as being largely due to the high proportion of non-guaranteed products in the securities sector’s retirement pension funds, which made them highly vulnerable to stock market declines. In the banking and insurance sectors, funds decreased by 2.1% and 0.9%, respectively. Notably, Samsung Life Insurance (total of 57.5486 trillion won) saw its third-quarter funds increase by 152.3 billion won compared to the previous quarter. This was due to an inflow of funds from Samsung Group affiliates, combined with retirement pension products designed primarily around defined-benefit (DB) plans that guarantee principal and interest, which allowed the company to actually increase its reserves even during a bear market. As a result, it surpassed Shinhan Bank (57.2252 trillion won) and KB Kookmin Bank (52.2226 trillion won) to take the top spot in retirement pension reserves.

Experts advise that cautious management of retirement pension funds is necessary, as the stock market has shown little sign of rebounding even in the fourth quarter. CEO Kim Byung-chul advised, “Since retirement pension products are inherently designed for long-term investment, it is not appropriate to excessively add or withdraw funds in response to market fluctuations.” He added, “Rather than aggressive equity-based products, investors should take advantage of the current decline in asset prices to increase the proportion of long-term investment products, such as Target Date Funds (TDFs), in their portfolios.”