It appears that the overall retirement system of Korea is the average within Asia. According to the Mercer CFA Institute Global Pension Index 2020,1 the Korean retirement system ranks sixth out of 11 countries surveyed in Asia, earning a C grade with an overall index value of 50.5, a weighted average of its sub-index values in the areas of adequacy, sustainability and integrity.
Recent legislative changes have created a roadmap for faster development of Korea’s retirement schemes market. These schemes have been getting the attention of many Korean employers. In response to these developments, we’re pleased to present a summary of the results from our groundbreaking 2020 Korea Retirement Scheme Survey.
In this survey, we have taken an in-depth look at areas including scheme design, investment management, provider services and fees, scheme governance, and legislative updates. The 2020 survey covers severance pay schemes, defined benefit schemes and defined contribution schemes in Korea.
Implementation of ERSA DB or DC schemes
Our survey reveals that 70% of Korean employers have implemented an Employee Retirement Benefit Security Act (ERSA) DB or DC scheme. Three-quarters (75%) of the surveyed companies with an ERSA DC scheme have a higher employer contribution rate than the legal minimum level.
Only 12% of ERSA DB schemes have pension committee oversight of the scheme’s management and operation, and just 14% have a written investment policy statement to document investment management. Forty percent of ERSA DC schemes have never reviewed their fund manager’s performance or the investment products and fund range for their employees.
Strategy and scheme governance
Benefit competitiveness, employee satisfaction and investment options are the main areas companies have reviewed in the past three years. Notably, they plan to review these same areas in the next three years as well.