NPS chief vows to be 'catfish' in retirement pension market with lower fees, higher returns

National Pension Service Chairman Kim Sung-ju said Tuesday that the NPS's entry into the fund-type retirement pension market would act as a "catfish" — spurring competition among private financial institutions.

Speaking at an online press briefing that day, Kim said the fund-type retirement pension system is "only just getting started," adding that NPS participation is essential given the fund's track record of managing a massive pool of assets stably and generating strong returns.

Earlier, a labor-management-government task force on strengthening retirement pension functions — involving the Ministry of Employment and Labor, labor groups and business associations — agreed to introduce a fund-type retirement pension system that would consolidate individually and corporately held retirement pension accounts and place them under professional management.

Kim called the agreement "historically significant" and said it would stand as "the greatest achievement of the Lee Jae-myung administration's five years in office."

"The NPS was established to secure retirement income for the public, and if it participates in the fund-type retirement pension business, it will be able to return pensions to the public with lower fees and higher returns," Kim said. He added that many subscribers have complained about weak fiduciary responsibility under the existing retirement pension system, and that NPS participation would allow the fund to carry out fiduciary activities at the same level it currently applies to national pension management.

Returns under the current "contract-type" retirement pension system remain low.

As of 2025, total retirement pension reserves in South Korea stood at 501.4 trillion won ($326 billion), a significant increase in scale, but 378.1 trillion won — or 75.4 percent of the total — is locked in principal-guaranteed products yielding around 3 percent. As a result, half of all subscribers earn annual returns of only around 2 percent.

The average retirement pension return last year was 6.47 percent — roughly one-third of the 18.80 percent the NPS earned over the same period, buoyed by a strong stock market.

The cost burden ratio for private retirement pensions, which reflects management fees, stands at 0.336 percent, while the NPS's fund management cost ratio is no more than 0.089 percent.

"Current retirement pension reserves are around 500 trillion won, with fees of about 2 trillion won, whereas the NPS manages a 1,600 trillion won fund with fees of 3 trillion won," Kim said. "In terms of cost-effectiveness, if the NPS joins the fund-type retirement pension business, subscribers can expect fees roughly one-third of the current level and returns roughly three times higher."

Kim also said he believes the NPS should participate "in the form of an open public institution model," noting that since the Korea Workers' Compensation and Welfare Service already manages retirement pensions for small and medium-sized enterprises, the NPS should focus on creating a new public model for retirement pensions to help the system take root quickly.

The NPS has developed an open public institution model targeting employees of public institutions as an alternative that minimizes friction with the private market and avoids overlap with the existing SME-focused system.

"If the NPS manages retirement pensions, they will naturally be separated from the existing national pension fund and operated in a separate account," Kim said. "The open public institution model is planned to run as a nonprofit service."

On the question of when the national pension fund might be depleted, Kim said the timeline can be pushed back sufficiently, and that structural reform should therefore proceed with caution.

"The national pension has already delayed fund depletion through parametric reform, and recent improvements in returns have pushed the timeline back further," he said. "If the government adds more support — such as subsidizing insurance premiums for low-income earners — we can build a system free from fund depletion concerns through the end of the 21st century."

He went on to say that pushing yet another structural reform on a national pension system "that has only just begun to stabilize is something to consider in a laboratory, not something that can be applied in the real world."

On the NPS's domestic equity allocation, Kim said the fund would "watch market trends and decide."

At its meeting this past January, the NPS Fund Management Committee suspended mechanical rebalancing — the automatic selling of assets when portfolio weights drift from targets. Under a decision made at the May meeting, that suspension is set to be lifted next month.

Asked about concerns that the end of the rebalancing suspension could flood the market with large sell orders, Kim said the NPS operates under "a public interest principle of minimizing the impact on the market."

On fiduciary responsibility regarding Starbucks, which drew social controversy over its "Tank Day" event, Kim said, "The NPS cannot step in as a problem-solver for every social issue," adding that the fund is "monitoring the situation to verify the facts."

Meanwhile, the NPS plans to push forward three initiatives in the second half of this year: subsidizing the first insurance premium payment for young people, launching a public trust service for dementia patients, and pursuing an AI-driven transformation.

The first-premium subsidy will apply starting with those born in 2009 who turn 18 after the revised National Pension Act takes effect on Jan. 1, 2027.

The measure is expected to cover about 450,000 people, each of whom will receive one month's premium of 41,000 won — equivalent to the lower threshold of the NPS's standard monthly income base of 410,000 won.

"The premium support is significant in that the state, rather than leaving young people to prepare for their future on their own, steps in to back them up," Kim said. He added that the dementia asset management service would be improved through a pilot program.