SEOUL — Kim Sung-joo, Chairman and CEO of the National Pension Service (NPS), officially declared the organization’s intention to participate in the government’s upcoming "fund-type" retirement pension system. During a briefing for journalists on June 23, 2026, Chairman Kim emphasized that leveraging the NPS's extensive experience in managing a massive fund could significantly enhance retirement income security for the public.
A Call for "High-Performance, Low-Cost" Pension Management
The core of the NPS's proposal is to provide superior cost-efficiency and investment returns compared to the current private-sector-led "contract-type" model.
Cost Efficiency: Chairman Kim pointed out that private financial institutions currently generate over 2 trillion KRW in annual fees from the 501 trillion KRW retirement pension market, while achieving an average annual return of only around 3%. In contrast, the NPS manages over 1,500 trillion KRW in assets with an operating budget of only about 3 trillion KRW for personnel and administrative expenses.
Performance Goals: Kim stated, "If the NPS participates, we can offer fees as low as one-third of the current market rate while targeting returns three times higher than the current average."
Catalyst for Change: By entering the market, the NPS aims to act as a "catfish"—an industry term for a market entrant that stimulates healthy competition among existing private financial institutions, ultimately benefiting consumers.
Addressing the Limitations of the Current System
The current retirement pension system in South Korea faces criticism for its low profitability and high fee structure. Because individual accounts are often managed by private financial institutions focused on "principal-guaranteed" products, long-term returns have struggled to keep pace with inflation. Currently, only about 16.5% of retirement savings are received as actual pensions, with the vast majority (84%) taken as lump-sum payments, failing to provide adequate long-term old-age income security.
The government, through a labor-management-government task force (TF), is working on a transition toward a "fund-type" system, where specialized institutions manage assets collectively rather than through individual contracts. The NPS has expressed interest in a "public institution-led model," which could potentially integrate retirement plans for the nation's 400,000 public sector employees as a foundational pilot project.
Professional Asset Management and Future Prospects
Chairman Kim highlighted that the NPS is uniquely qualified to lead this transition, noting its proven track record in diversification, risk management, and large-scale asset allocation. As of March 2026, the National Pension Fund stands at approximately 1,526.1 trillion KRW. While the NPS achieved a record-breaking 19.9% return in the previous year, the average retirement pension return has significantly lagged behind, underscoring the potential benefit of NPS-managed funds.
However, the path forward requires legislative support. The government plans to finalize the design of the fund-type retirement pension system by next month and aims to submit amendments to the Employee Retirement Benefit Security Act within the year. While the NPS remains ready to step in, it acknowledges that participation is contingent upon final government policy and National Assembly approval.
"The NPS is the institution that has best managed diversification, asset allocation, and risk management," said Chairman Kim. "While our participation depends on the outcome of legislative processes, we are committed to playing a pivotal role in ensuring a more stable and prosperous retirement for all citizens."
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