Pension Funds Allowed for Stock Investment from Next Year

It is expected that stock and real estate investment for 59 pension and other funds including the National Pension Fund will be allowed from next year.

The government and the ruling party agreed to eliminate a law banning stock and real estate investments for use in pension and other funds at a meeting attended by the MDP Policy Director Jung Se-kyoon and the Budget Planning Minister Park Bong-hum on August 22nd.

Revision of a related law will be made as early as this fall to start applying the new law from next year.

A majority of GNP members are in agreement on the issue.

The Budget Planning Ministry`s Fund Policy Director Byun Jae-jin said, “Considering the adaptive conditions of the financial markets with low interest rates, we decided to change the related laws to guarantee people the right to manage their own funds at their own will. We will soon have a discussion session with the majority GNP.”

The GNP`s Vice Policy Director Kim Sung-sik said, “To give an opportunity for funds to be used as stock investments, we agree with the revision of the law. But, there should be a complementary measure in the event of a funds deficit.”

Some 6 trillion and 60 million won out of the total 157 trillion won of 59 funds was put into stock investments at the end of last year, accounting only for 4 percent of the total.

The Economic and Financial Ministry`s Stock Policy Director Lee Suk-joon said, “Due to the banning stipulation in the fund management law, fund owners were not able to invest their money at their own will. But after the revision, much more money will go into the stock market next year.”

The government also plans to extend their management performance evaluation period from the current one-year unit to a two- or three-year unit to induce long-term investments and less responsibility for fund money.

Kwang-Hyun Kim kkh@donga.com