South Korea’s Ministry of Economy and Finance outlines plan to extend external retirement funding to all workplaces by 2030

South Korea’s Ministry of Economy and Finance and other authorities have announced a joint retirement pension reform plan to require external funding of retirement benefits, expand professionally managed pension funds, encourage pension payments rather than lump sums, and revise investment rules. If legislative amendments pass in 2026, external funding would become mandatory for workplaces with at least 100 employees in 2028, those with 10–99 employees in 2029, and those with fewer than 10 employees in 2030. The obligation would cover benefits accruing from service after each phase begins. The measure addresses unpaid retirement benefits, which accounted for 41.1% of total wage arrears in 2025. The pension fund framework would allow financial institutions, employer or labor groupings, and public institutions to establish trustee entities to manage defined contribution plans and individual retirement pension accounts. Investment gains and losses would remain with participants. Trustees would require authorization from the minister of employment and labor through a two-stage licensing process, including minimum capital requirements. Safeguards would include a statutory duty to prioritize participants’ interests, liability for breaches, mandatory operational risk reserves, and investment diversification and conflict management rules. For specified breaches involving investment management, conflicts of interest and disclosure, trustees would bear the burden of disproving causation or fault to avoid compensation liability. Asset custody and valuation would require outsourcing, while core investment policy decisions would remain with trustees. Eligibility for the public retirement pension fund for small and medium sized enterprises would expand to workplaces with up to 300 employees in January 2028. To preserve retirement savings and encourage pension income, the plan would facilitate loans secured against pension assets as an alternative to early withdrawals. Providers would have to supply comparisons of expected returns and payments under pension and lump sum options, and benefits would default to pension payments unless recipients choose a lump sum. For existing contractual arrangements, the current 70% limit on risky assets in individual retirement pension accounts would be eased gradually. Default investment options would undergo performance assessments, with poor products removed and their application broadened to reduce periods when savings await investment. The government plans to prepare legislative amendments in November and seek parliamentary passage in December 2026.