South Korea’s Financial Services Commission has published a joint government plan to make external funding of retirement benefits compulsory, expand pension funds managed by licensed trustees and reform pension payouts and investment options. Subject to legislative passage in 2026, the funding obligation would cover workplaces with at least 100 employees in 2028, those with 10–99 employees in 2029 and those with fewer than 10 employees in 2030. It would apply only to benefits accruing from service after the relevant implementation stage begins. The proposed pension funds would cover defined contribution (DC) plans and individual retirement pensions (IRPs), with investment gains and losses accruing to members. Trustees would require authorization from the Ministry of Employment and Labor, and those sponsored by financial institutions would face a minimum capital requirement of KRW 12 billion. Statutory duties would require trustees to prioritize members’ interests and maintain operational risk reserves of about 0.25% of pension assets. The burden of proof would shift to trustees in specified compensation claims involving investment management, conflicts of interest or disclosure failures. Custody and valuation would be outsourced for independent verification, while investment policy and risk management would remain trustees’ responsibility. To encourage retention of retirement savings, the plan proposes enabling loans secured against pension assets and requiring advance comparisons of regular pension payments and lump sum receipts. Regular pension payments would become the default unless a member requests a lump sum. Reforms to existing contractual pension arrangements would progressively relax the current 70% ceiling on risk assets in IRPs, broaden eligible investments for DC plans and IRPs, and remove poorly performing default investment products. The government plans to prepare amendments to retirement benefit legislation in November 2026 and seek parliamentary passage in December.
South Korea’s Financial Services Commission outlines plan to mandate external retirement benefit funding by 2030
South Korea’s Financial Services Commission has outlined a joint government plan to require external funding of retirement benefits across all workplaces during 2028–2030, conditional on legislation passing in 2026. The package would expand pension funds managed by licensed trustees, supported by capital requirements, fiduciary duties and operational risk reserves. It also proposes regular pension payments as the default and gradual relaxation of the 70% risk asset investment ceiling for individual retirement pensions.