Korea to decide details on fund-type retirement pension by July

South Korea is set to finalize key details of its proposed fund-type retirement pension system by July 2026, marking a pivotal step in overhauling its corporate retirement savings framework. The reform, spearheaded by the National Policy Planning Committee under President Lee Jae-myung's administration, aims to introduce a competitive, fund-based model that shifts away from the current reliance on low-return principal-guaranteed savings accounts. Under the plan, employees will select from multiple private-sector pension funds, managed by institutions overseeing at least 50 trillion won ($36.4 billion) in assets, to optimize investment returns and efficiency.

The new system draws inspiration from international models such as the Netherlands' ABP and Australia's superannuation framework, while adapting to Korea's context. It emphasizes a collective defined contribution (CDC) structure, pooling investments under professional management and allowing allocations to alternative assets like real estate, private equity, and venture capital. This approach contrasts with the current system, where over 87% of contributions remain in low-return instruments, yielding an average annual return of just 2.35% over the past five years.

The government also plans to mandate workplace retirement schemes for large employers, starting with firms employing over 300 workers, and explore tax incentives for long-term investments. The National Pension Service (NPS), Korea's largest institutional investor, has demonstrated the potential of alternative investments, with its alternative portfolio returning 17.09% in 2025. Policymakers aim to replicate such performance while addressing Korea's aging population and low birthrate challenges.

Legislation to revise the Retirement Benefit Security Act is expected to follow, with implementation potentially beginning as early as 2027.