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KMID : 1124020090250030249
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Korean Social Security Studies
2009 Volume.25 No. 3 p.249 ~ p.280
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Status of Personal Pension and Remedy for Retirement Income Protection
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Lee Soon-Jae
Kim Hun-Soo
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Abstract
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We suggest remedial measures for ‘personal pension’ system to improve its function of retirement income protection and capital market activation through analyzing the present status and reviewing the cases of advanced countries after 15 years of adoption in Korea. Income replacement ratio of Korea appeared to be lower than 10%, while the size of assets of tax-qualified personal pension has been growing at higher than 20% per year, accounting for merely 7% of total market value of domestic stock market. This indicates limited contribution to the capital market. The incentive for increasing the contribution thereby promoting the income substitution rate is to adjust the income tax deduction limit upward, and make the contract persist until retirement age. To promote the persistence rate, an integrated internet portal site needs to be built in order to provide such information as the individual finance firm’s persistence rate and yield of personal pension to consumers. From the operational view, we propose internet marketing utilizing the use of internet portal site to overcome the passive sales practice of face-to-face sales channel due to low sales commission of personal pension products. For the finance firms to develop products actively, government and/or supervisory authority need to support revision of related laws and regulations.
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KEYWORD
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personal pension, retirement income protection, income replacement ratio, persistence rate, personal pension web portal
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