Korean Pension Research Articles

Can rural elderly groups be supported by increasing the pension contribution rate?

As a typical East Asian country transitioning from a production-based social insurance system to a modern free social insurance system, South Korea has set a precedent for other Asian countries. This study adopts data from 2006, 2010, and 2012 Korean Longitudinal Study of Aging (KLoSA) and uses a fixed effect analysis of the quasi-natural experiment to conclude that the increase in the Korean pension contribution rate has a limited negative impact on social security participation. The degree of filial piety of children, including the financial support of those children, rather than the number of children, affects the participation of the elderly in social security insurance. Thus, an alternative relationship between family pensions and social pensions presents itself. This paper discusses the mechanism that factors influence the willingness to participate in pension insurance with reduced replacement rates in an extended family of a multigenerational population. After systematically delineating the background of South Korea’s welfare system, this paper compares the similarities between China and South Korea in this regard and proposes that China and other East and Southeast Asian countries can learn from South Korea’s example.

Do Korean Pension Guidelines Improve Firms’ Management Efficiency?

This study examines whether Korean pension guidelines that limit the payment of director show practical policy effectiveness by improving corporate management efficiency. Specifically, this study examines stickiness of pay to determine whether opportunistic executive payment existed in firms where executive pay was above 50% of articles of incorporation, before the announcement of the Korean pension guidelines. Further, we examine how executive pay stickiness has changed after the implementation of Korean pension guidelines to check whether they have been effective in improving corporate management efficiency. We use data from 2011 to 2019 and determine that, prior to the announcement of Korean pension guidelines, firms who paid above 50% of articles of incorporation showed higher executive payment stickiness. This suggests that these firms had a more opportunistic payment structure. However, this stickiness disappears after the announcement of Korean pension guidelines in 2020, suggesting that the Korean pension guidelines for executive pay show policy effectiveness. However, in 2020, the majority of decision-making within firms was affected by the global pandemic; therefore, there exists a need for additional research using a sample unaffected by the impact of the pandemic.

The Effects of Shareholding of the National Pension Fund on Environmental, Social, Governance, and Financial Performance: Evidence from the Korean Manufacturing Industry

With the growing number of environmental, social, and governance (ESG) problems, many companies have begun to implement more sustainable business practices. In the midst of this change, institutional shareholders declare and adopt socially responsible investment procedures, which is a way of engaging in investor activism. Despite the growing interest in investor activism following the introduction of the stewardship code, little attention has been paid to how socially responsible investment practices of institutional investors affect the non-financial value of the pillars of environmental, social, and governance as well as financial performance, including short-term accounting (ROE, ROA) and long-term market performance (Tobin q). The current study examines whether the national pension fund (NPF), the world’s third-largest Korean pension fund, can increase the ESG performance of investee firms in addition to accounting and market performance through institutional investors’ shareholding. This study, by applying path analysis, attempts to explore the relationship between the NPF’s socially responsible investing, ESG, and the financial performance of the investee firms. This research offers evidence that ESG performance acts as a moderator or a mediator between NPF’s shareholding and financial performance.

Pension Fund Trading Behavior and the Index Inclusion: Evidence from the Korean Stock Market

ABSTRACT In this paper, we study the trading effect of Korean pension funds on price change around index inclusions. We find that pension funds strategically respond to index composition changes, and their demand for newly included stocks is high and persistent. The liquidity providers for the demand of pension funds are individual investors. We also find the significant and positive effect of pension funds’ trading on newly included stocks’ prices following the announcement date. On the other hand, we could not find evidence of a positively persistent relationship between the trades of different types of investors and newly added stock returns. Overall, our findings highlight that the trading of pension funds can be an important explanatory factor for the index inclusion effects.

Welfare Expansion without Inequality Reduction: Institutional Explanation of Old-Age Poverty in Korea

AbstractOld-age poverty in Korea remains exceptionally high among OECD countries despite a significant expansion in pension expenditure. This article presents an institutional explanation for such a puzzle. Using ‘targeting within universalism’ as the analytic framework, this study examines the institutional effects of pension models on old-age poverty in Korea. Firstly, comparative analysis finds that universal provision of pensions negatively affects old-age poverty independent of the expenditure size, identifying Korean pensions as the least universal among OECD countries. Secondly, institutional analysis of the Korean pension system explains why the expenditure growth left a large share of the elderly with no or a partial pension. Finally, microsimulation analysis examines alternative assistance pension models for their potential to alter poverty outcomes. Strikingly, universal models alleviate old-age poverty more cost-effectively than the extant targeting model, questioning the efficiency-based justification for low-income targeting. In particular, the universal floor model appears to be the most effective, allowing greater benefits to the poorer without a means test. Even for assistance benefits, universal models may better remedy poverty under such conditions as low take-up among the needy, prevalence of low-income incidence, and pro-rich distribution of extant social transfers.

The Enlightenment to CHINA from the Investment and Operation of the South Korean PENSION INSURANCE FUND

Purpose: The pension insurance fund serves as the lifeline for a majority of Chinese people due to its close connection with people’s personal interests. Method: The increasing severity of becoming an aging society, compounded with the requirement of pre-serving and increasing the value of the basic pension insurance fund, has made the investment and manage-ment of the pension insurance fund especially important. Results: With more than 30 years of experience running a pension insurance fund, South Korea(ROK) has implemented a set of standardized investment policies for pension insurance investment, together with an ac-tuarial mechanism, boasting relatively high transparency in terms of information disclosure. This study analyzes the actual effectiveness of investment policies and operation efficiency of the ROK pension insurance fund. Sub-sequently a summation and assessment of the fundamental features and experiences in its operation and in-vestment are provided. Conclusion: This paper then produces insights and advice on reforming and optimizing the investment and operation of the Chinese pension insurance fund, in hopes that these suggestions can play a positive role in supporting the sustainable, healthy development of the pension insurance fund in China.

The Case for a Reciprocal Health Care Agreement between Australia and South Korea

Objectives: This study presents the case for a reciprocal health care agreement (RHCA) between Australia and South Korea. Design and Setting: The research utilised a qualitative social scientific methodology. Document analysis was conducted on government reports, official statistics and media articles in English and Korean. Main outcomes: In Australia, the Health Insurance Act 1973 enables health care agreements with 11 nations, however, Korea has no similar legislation in place. Therefore, Korea would need to build a broader consensus on the need for a RHCA in full, based on the precedent of Australia's agreements with other nations, as well as on the Korean Pension Act, which has enabled reciprocal (equal treatment among the countries) pension agreements with 28 nations through an exceptive clause. Results: The active government commitment and involvement of the Ministry of Health and the Department of Foreign Affairs and Trade in Australia, and of the Ministry of Health & Welfare and Ministry of Foreign Affairs in South Korea, would be essential for a successful RHCA process to come to fruition. Conclusions: While a potential health care agreement between Australia and Korea would constitute a significant step forward in strengthening people-to-people links between these two significant trading partners in the spirit of health diplomacy, the feasibility at the current time is very low indeed.

Korean Pension and Public Fund Performance Decomposition: SAA, TAA, and AS

Korean Pension and Public Fund Performance Decomposition: SAA, TAA, and AS

국내외 연기금의 사회적 책임투자와 정책적 시사점: 사례 분석을 중심으로

최근 글로벌 금융위기 발생의 주요 원인으로 투자자 탐욕 등이 거론되며 윤리적 투자의 중요성이 부각됨에 따라 사회적 책임투자(Socially Responsible Investment, SRI)에 대한 사회적 관심과 요구가 증대되고 있는 상황이다. 특히 공공성이 높은 연기금들에 대해서 사회적 역할을 강화하고 보다 높은 수준의 선관주의 의무 이행을 위해 책임투자 도입을 확대해야 한다는 요구가 높아지고 있다. 사회적 책임투자는 장기투자를 통한 지속가능한 이익 창출을 목표로 하며, 기업가치 평가 및 투자대상 선별과정에서 재무적인 분석뿐만 아니라 기업의 환경, 사회, 지배구조 요소들을 고려하여 투자의사를 결정한다. 이에, 본 연구는 국내외 연기금의 책임투자 사례 분석을 바탕으로 국내 연기금이 위탁 운용 중인 책임투자 펀드 수익률에 대한 분석 등을 가미하여 향후 국내 연기금의 바람직한 책임투자 방향에 대한 시사점을 제공하고자 한다. 해외 주요 연기금들의 책임투자 사례를 살펴본 결과 대체로 책임투자를 지속가능한 투자로 유지하기 위해 노력하고 있으며, 그 규모를 점차 확대하고 있음을 알 수 있었다. 또한 국내 책임투자 펀드의 수익률 분석 결과 단기로는 2019년 국내 주식시장 부진의 영향으로 인하여 대체로 음의 수익률을 기록한 반면, 장기인 과거 3년(2017-19) 수익률은 5.30% 기록하여 책임투자는 장기 투자가 필수임을 시사한다. 마지막으로 사례 및 실증분석을 바탕으로 본 연구에서 향후 책임투자 방향에 대하여 다음과 같이 제안 한다; 1) 책임투자의 점진적 확대 및 이행을 위한 체계 정비 및 시스템 구축을 통한 기업의 본질적 가치에 집중하는 투자 환경 조성을 고려한다. 2) 중장기적 관점에서 기업의 가치에 대한 투자를 고려한다. 3) 테마 지수 개발 및 ESG 특화 펀드 조성을 고려한다. 4) 연기금의 ESG 평가 역량 및 성과평가에서 정성평가 강화를 고려한다. 5) 전반적인 책임투자 확대 및 활성화를 위해서 학계나 산업계의 관련 연구 지원을 고려한다. 위의 제언은 향후 국내 연기금의 책임투자 방향 설정 시 참고할 수 있을 것으로 기대된다.

Analysis of the Korean Pension System and Alternatives Using Stochastic Overlapping Generation General Equilibrium Model

Analysis of the Korean Pension System and Alternatives Using Stochastic Overlapping Generation General Equilibrium Model

An Empirical Study on the Improvement of Korean Trade for Tourism- Based on the Survey from Foreign Tourist using Korean Pension -

An Empirical Study on the Improvement of Korean Trade for Tourism- Based on the Survey from Foreign Tourist using Korean Pension -

A Study on Fixed Income Fund Management Outsourcing for Korean Pension Funds

A Study on Fixed Income Fund Management Outsourcing for Korean Pension Funds

Designing an Alternative Public Pension Scheme: A Korean Case Study

The trends of ageing population and slow economic growth have become a major concern for public pension schemes with the defined benefit (DB) type. To mitigate the impact of this trend and secure long-term financial sustainability, several countries have recently adopted notional defined contribution (NDC) schemes. In this paper, we show how to apply an NDC scheme to the public pension system of Korea, arguably the fastest ageing country. In particular, we create a new pension system by combining the current Korean pension scheme and an NDC. Through simulations it is shown that the proposed scheme can reduce the financial instability caused by the changes in demographic and economic factors, while retaining the income redistribution component. We further consider applying a German-type automatic balancing mechanism to the proposed scheme, by using the average income to determine the return rate of the fund, to make it sustainable in the long term.

Divergent Paths, Incomplete Models: Chinese and Korean Pension Development in Comparative Context

The aim of this article is to investigate whether or not the East Asian welfare model (EAWM) can adequately represent China and Korea by examining the historical development of their pension systems. Since Esping‐Andersen introduced his classic three‐world classification of liberal, conservative and democratic welfare types, a wave of comparative social policy analysis in East Asia has emerged. Two distinct perspectives have prevailed within this field of research. First, a number of scholars have elaborated and validated Esping‐Andersen's three‐world classification by claiming East Asian nations are on a developmental trajectory that make them comparable to the Western cases upon which his study was based. The second perspective claims that unlike advanced capitalist states in the West, East Asian countries have constituted a distinctive welfare state model – the so‐called “East Asian welfare model.” This study argues that the development of welfare systems in both China and Korea makes apparent the weaknesses of the EAWM.

우리나라 퇴직연금의 재정추계모형과 장기전망 - 확정급여형 가정 중심으로 -

퇴직연금 시장의 확대로가입자 규모가 증가하고 적립금 규모가 빠른 속도로 증가함에 따라 장기적으로 우리나라 퇴직연금 전체의 가입자 규모 및 재정 전망에 대한 필요성이 증가되고 있다. 즉 일인 이상 근로자를 고용한 사업장까지 퇴직연금제도에 가입이 가능하므로 퇴직연금의 가입자 규모는 장기적으로 국민연금 사업장 가입자와 유사하게 되며, 국민연금의 사업장 가입자 자료를 활용하여 퇴직연금 전체의 재정전망이 가능할 수 있다. 따라서 본 연구에서 우리나라 퇴직연금 전체의 장기재정 전망에 대한 추계를 위한 방법론을 제안하고 추계결과를 제시한다. 즉 장기적으로 우리나라 퇴직연금 전체의 가입자 수 및 부담금의 규모를 전망하고 은퇴 시 수급자 규모 및 연금급여지출 규모를 전망하였으며, 연도별 투자수익 및 적립기금에 대한 규모를 추정한다. 기존의 퇴직 연금에 대한 추계 연구와의 차이점은 일부 사업장에 대한 재정추계를 하거나 또는 가입자 규모나 적립금 규모만을 전망하는 제한된 범위에 대한 재정추계가 아닌 퇴직연금 전체를 대상으로 연구의 범위를 확대했으며 이에 대응되는 추계방법론을 제안하였다. 본 연구의 의의는 가입에서 연금 수급에 이르기까지 추계로부터 제시되는 인구통계학적 구조전망과 부담금 및 기금적립금 등 재정전망에 대한 분석에 있다고 볼 수 있다. 또한 장기전망의 불확실성에 따른 예측 위험을 줄이고자 퇴직연금 신규가입자 증가율에 대한 변동가능성을 고려하였으며, 예정이율에 변동을 주어 부담금 및 기금적립금 등의 전망결과에 대한 변화를 살펴보았다. The Korean market of pension plans has recently increased and pension plans will be expected to play an important role in the retirement system as complement of the national pension system in the future. However, there are a few of research papers on actuarial projections of pension plans. This paper will discuss a long-term financial projection on defined pension plans using data based on the national pension workplace participants. Previous researches focused on company-based financial projection of pension plan. But, this paper concerns on total Korean pension participants and suggests a method to calculate future financial projection of total pension plans. Finally, this research will suggest several numerical results of normal costs, benefits, numbers of workers, etc.

The Impact of Neo‐liberalism on South Korea's Public Pension: A Political Economy of Pension Reform

AbstractThis article examines the recent Korean pension reforms from a political economy perspective. It argues that these reforms are of particular interest because, unlike major pay‐as‐you‐go pension schemes in Europe, the Korean pension scheme is a funded one and, therefore, is subject to market exposure. Also in contrast to the problems that public pension reforms have encountered in European and other OECD countries, especially ‘blame avoidance’, the more radical Korean reforms were implemented without significant challenge or resistance. First of all, the National Pension Scheme is described prior to the 1997 Asian economic crisis. Then the impact of this crisis on the Korean welfare state and, especially, its pension system are analysed. The main part of the article consists of a political economy of the pension reform process, in which the key roles of the international governmental organizations and the domestic neo‐liberal policy elite are pinpointed. This neo‐liberal ideology was critical in developing and sustaining an influential discourse on the ‘crisis’ in Korea's national pension fund. The article concludes by arguing, against the neo‐liberal tide, for the inclusion of a pay‐as‐you‐go element in the national pension in order to tackle escalating poverty in old age.

Korean Pension Policy from 1998 to 2007: Changes of the boundary between the government and the market

Korean Pension Policy from 1998 to 2007: Changes of the boundary between the government and the market

Democratic governance and bureaucratic politics: a case of pension reform in Korea

English Governance theories have two theoretical tendencies: downplaying the role of the state and overemphasis on cooperative relationships among participants in the policy-making process. This article seeks to redress the balance by paying more attention to bureaucratic politics and conflicting policy networks, using the case study of Korean pension reform. This orientation enables us to understand the effect of governance not only on relations between the state and civil society, but also on the relative power among state bureaucracies. The Korean case demonstrates that the establishment of democratic governance under the leadership of President Kim Dae Jung reinforces social bureaucrats’ power over the social policy domain, which had long been within the power of economic bureaucrats in the heyday of the Korean developmental state.