National Pension Fund Taken Over by Private Sector

For better efficiency, Korea’s national pension fund will be split up into a few divisions run by multiple private management institutions.

In addition, the fund management committee, a top decision-making body for the pension scheme, will be separated from the government to include seven private experts, and the committee’s responsibility for fund management will be stipulated in the national pension law.

The Ministry of Health and Welfare (MOHW) said yesterday that it will submit a revised version of the national pension law based on “national pension scheme reform plan” in the upcoming National Assembly plenary session.

Under the plan, a new organization composed of seven private financial and asset management experts will replace the existing fund management committee, currently a non-standing government agency, to boost profitability and independence in operating the national fund. The fund management corporation split from the fund management headquarters of the National Pension Service will administer the actual business.

On the committee, a president will work full time with a chairman, and five other members will be part-timers.

The chairman and members from the private sector will be referred to by the MOHW’s recommendation committee with an agreement from the prime minister, and appointed by the president. The recommendation committee chaired by the health minister will consist of eleven members, including five officials from relevant ministries, such as the deputy minister of planning and budget at the Ministry of Finance and Economy, three representatives of pension subscribers, and three public representatives.

Only the president of the fund management corporation will be recommended by a recommendation commission on the fund management committee and appointed by president with the prime minister’s consent.

The government directed both the fund management committee and corporation to undergo inspections and audits from the Board of Audit and Inspection and the National Assembly to ensure transparency of fund management.

Health and Welfare Minister Byeon Jae-jin said that an amendment of the pension law will enable the fund management committee to operate the fund independent of the government and that ultimate responsibility and authority over the national pension scheme will be transferred to the chairman of the committee from the health minister.

However, the health minister will be able to attend a meeting on the committee and express opinions from related parties, including the ministries of finance and economy, health and welfare, and planning and budget, to ensure government accountability for the fund operation.

The government also decided to push for the breakup of the pension scheme as a mid-to-long term task in order to hedge management risks considering the growing influence of a bloated pension fund on the financial market.

Moreover, it will also review other various measures, such as setting up a regional headquarters at home and leaving part of the management work to foreign companies on the condition that they employ Koreans.

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