Retirement pension accounts to allow direct investment in personal government bonds from September

Starting next month, holders of defined contribution (DC) retirement pension accounts or individual retirement pension (IRP) accounts will be able to invest directly in 10- and 20-year personal government bonds. The first subscription period runs Sept. 9 to Sept. 15.

The Ministry of Economy and Finance held a launch ceremony Thursday at the Conrad Hotel in Yeouido, Seoul, marking the completion of the operational systems needed to support the new regime.

Under the new arrangement, individuals can purchase 10- and 20-year personal government bonds not only through dedicated personal government bond accounts but also through their existing DC or IRP accounts. Defined benefit (DB) pension plans, in which members do not directly manage their own contributions, are excluded.

At launch, subscriptions will be available through three banks — Shinhan, Hana and NH NongHyup Bank — and five securities firms: Mirae Asset, Samsung, Korea Investment, KB and NH Investment. The government plans to expand the number of participating financial institutions in stages as they complete their preparations.

Personal government bonds are savings-type bonds restricted to individual investors. Holders who keep the bonds to maturity receive a lump-sum payment at that time, calculated on a compound annual basis using the face rate plus a government-set premium rate. Investors also benefit from tax advantages attached to retirement pension accounts, including tax deductions and deferred taxation on investment returns.

However, as a long-term investment product, careful cash-flow planning is advised.

Existing personal government bonds can be redeemed early after one year from issuance, but doing so forfeits the premium rate and compound interest benefits — only the face rate applied on a simple-interest basis is paid out. The bonds cannot be transferred to another person except through inheritance, bequest or compulsory execution.

The government expects that allowing personal government bonds into retirement pension accounts will broaden long-term demand for government bonds.

Domestic retirement pension assets stood at about 500 trillion won ($361 billion) at the end of last year. If even a portion of those funds flows into personal government bonds, officials said, it would widen the investor base for government bonds — which has been dominated by institutional investors — and help the government secure stable fiscal financing.

Personal government bonds were first issued in 2024. In their debut year, issuance totaled 700 billion won with an average subscription rate of 100 percent. Since then, five-year bonds and an installment subscription option were introduced, and three-year bonds were added this year. As of this month, total issuance has reached 1.3 trillion won, with the average subscription rate rising to around 160 percent. Investment through retirement pension accounts, however, is limited to the 10- and 20-year maturities, in keeping with the program's goal of building long-term retirement assets.

Second Vice Minister of Economy and Finance Heo Jang said the change would "expand investment choices for retirement pension holders, enhance the stability and returns of retirement assets, and broaden the base of government bond demand." He added that the ministry would "continue to develop and refine the system so that it serves as a solid pillar of financial security for the public in their retirement years."