Guide to changing retirement pension
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‘In-kind transfers’ began on the 31st for retirement pensions worth 400 trillion won. It is now possible to transfer your retirement pension to another financial company without having to cancel the product you are investing in early.
However, each financial company has different fees and products, and some products cannot be replaced, so there are many things to consider carefully. Experts from banking, insurance, and securities companies with extensive experience in pension work asked about checkpoints for a successful transition.
Experts agreed that five things that can affect mid- to long-term returns should be carefully considered: commissions, diverse product portfolios, presence of a dedicated service organization, main transaction benefits, and post-retirement services.
The easiest part to compare is the fees.
Retirement pension fees vary depending on the accumulated amount and contract period. For example, if a worker puts 100 million won into a defined contribution plan (DC type) that he or she is responsible for operating and signs a 10-year contract, there is a difference of 0.3 to 1.0 percentage points depending on the financial company.
Kim Do-ah, branch manager of Woori Bank’s TCE Signature Center Private Bank (PB), emphasized, “Because retirement pensions are long-term products, the lower the fees, the higher the rate of return.” Ryu Yeon-seo, head of KB Kookmin Bank Golden Life Pyeongchon Beomgye Pension Center, said, “In addition to various fee benefits, it is good to see what preferential home transaction benefits are provided in relation to exchange rates and loans.”
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It is also important to choose a financial company that offers a variety of products. As a result of Maeil Business Newspaper comparing the number of exchange-traded funds (ETFs) that can be invested in as a retirement pension over the past four months among the top 10 companies in terms of reserve size, there was an increase of 504. Branch Manager Kim explained, “A lot of variety is not necessarily a good thing,” and “We need to see how large the selection of products is with proven returns compared to volatility.” The assessment is that when comparing mid- to long-term returns, companies that have earned profits above the minimum inflation rate should be selected. Choi Jong-jin, head of the pension division at Mirae Asset Securities, said, “In the early days of signing up for a retirement pension, the accumulated amount was small, so it was often put into a principal-guaranteed product without being affected by the rate of return gap.” He also added, “As the accumulated amount increases, the size of the profit or loss due to the rate of return gap increases, so high rates of return are possible for a long period of time.” “We need to find a company that has recorded it,” he said.
Experts pointed out that the presence of a dedicated team to receive follow-up management after changing pension management companies and the ability to manage non-face-to-face platforms are also important. Branch Manager Kim said, “It is important to check whether there is a dedicated team for the product you want to subscribe to and a system in place to receive continuous consultation.” Jeong Hae-chang, manager of the retirement pension asset management team at IBK Industrial Bank, said, “Checking stability indicators such as business credit ratings is basic,” and added, “We also need to check whether non-face-to-face channels such as the Internet and smart banking are customer-friendly.” As most financial products are managed through non-face-to-face channels, the advice is to consider whether the online platform is well-equipped.
Yang Kook-jin, deputy director of Kyobo Life Insurance’s Retirement Pension Consulting Center, said, “It is good to check whether there is a life pension and whether tax saving services can be provided when receiving the pension.”
There are also things to be careful about. The point is that not all products can be physically transferred. Deputy Director Yang said, “For some Guaranteed Interest Rate (GIC) products, physical transfer is not possible, and if you switch to another business, the product will be repurchased, so you may be disadvantaged in the application of interest rates.” Currently, physical transfer of insurance products in the form of insurance contracts (GIC), equity linked funds (ELF), derivatives-linked securities, and money market funds (MMF) is not possible.
Center Director Ryu said, “It is more important than anything to be clear about one’s investment inclinations and goals,” and added, “You must choose a product that you can invest in continuously while pursuing stability and profitability within a risk level you can tolerate. “If you trade too frequently or invest in trends, you may end up in trouble,” he pointed out.
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