A new management system will be introduced into a retirement pension that is close to 295 trillion won. The Ministry of Employment and Labor announced on the 5th that it will apply the ‘Preliminary Designation Management System (Default Option)’ to the retirement pension contribution (DC) subscribers and personal retirement pension (IRP) subscribers.
What is the default option
The default option is simply a system that allows the reserve to be operated in a pre-determined method if a retirement pension subscriber does not determine the financial product to operate the retirement pension reserve. For example, if the A product has been operating a retirement pension reserve and the A product has matured, it was previously re-worth or deposited as a cash asset, but if the default option was designated as a B product in advance, it is automatically operated as a B product. will be.
If there is no order for four weeks, even if the maturity has arrived, it is notified that it will be operated as a default option from the retirement pension provider (subscriber financial company).
DC and IRP subscribers are eligible for default options. Labor and management can decide whether to default options through agreement, and determine the default optional financing products of retirement pension operators. The default options can change the operation instructions in different ways, depending on the subscriber’s intention.
The difference is
There are two major things that change with the default options. One is that financial products with maturity are not automatically re-worth. Normally, subscribers often operate retirement pension reserves with one-year banks and savings banks. When the maturity comes, it has been automatically re-worth, but when the default option is applied, it is not re-worth it, but is automatically operated as a default option.
The second is that the limit of investment product management of retirement pension reserves is 100%. Financial products, which can be determined as a default option, included fund products, because this product can only be used to operate 100%. The current retirement pension supervision regulations require up to 70%of the limit of investment product operation (risk assets) such as stocks, but the default options are available up to 100%of the reserves.
What about the default option product
The key is that financial products that can be operated as default options are superior to existing products. This is because the government will help directly with retirement life by increasing the return of retirement pension reserves that are neglected by the government. The government also mentioned a 6-8%return on cases in the United States.
At the same time, because it is an old age fund, it is necessary to stability, so the relevant agencies will form a product deliberation committee to deliberate and approve the product of the default option. Currently approved products include ▲ principal guarantee products, fund products, and portfolio types, and funds and portfolios are planned to deliberate on the adequacy, loss and fees of asset allocation.
Products related to the default options will be published through the first deliberation committee in October.
In addition, the government plans to publish the status of default option management and the yield of the Ministry of Employment and Labor through the Ministry of Employment and Labor’s homepage and the Financial Supervisory Service’s integrated pension portal, and regularly evaluate the default options at least once every three years.