The top four service providers administer around half of all funded corporate pension assets in Korea and account for KRW 7 trillion of assets according to Towers Watson’s Korea Pension Report. The new report covers 53 service providers including banks, insurers and securities firms.
The report, which uses end 2009 figures, shows that Samsung Life is currently the market leader in corporate pension business with assets under administration in excess of KRW 3 trillion, mostly sourced from defined benefit pension plans. It also shows the banking sector as having the greatest market share of 49% or KRW 6.8 trillion, followed by the insurance sector and then the securities sector. Within the banking sector, the top three players are Kookmin Bank, Shinhan Bank and Woori Bank, with each administering assets in excess of KRW 1 trillion (or KRW 3.9 trillion in aggregate).
Jayne Bok, director of investment services for Korea at Towers Watson, said: “Service providers that are affiliated with large conglomerates or financial groups have tended to rank higher in our report. Samsung Life’s dominance is largely driven by its strong ties with Samsung affiliates which account for over 50% of Samsung Life’s pension business, including a very large KRW 2 trillion DB plan.”
The report, which shows total funded corporate pension assets of KRW 14 trillion, estimates these will grow significantly to between KRW 30 and 40 trillion by the end of this year as large numbers of corporate sponsors switch from the legacy severance pay system, a move driven by imminent changes in tax treatment.
Jayne Bok said: “Many service providers are now under enormous pressure when competing for pension business. Given the relatively small asset base at present, some of the weaker service providers may soon be forced to exit due to lack of scale. While there is no ideal asset size that ensures success, it is interesting to note that of the 53 service providers, 30 firms have assets of less than KRW 100 billion.”
According to the report, asset managers have been rapidly setting up dedicated retirement fund products for service provider platforms and their underlying corporate pension clients in the four years since Korea enacted the Employee Retirement Benefit Security Act which was aimed at replacing existing severance schemes. As a result, at the end of 2009 there were 34 asset managers managing 255 registered retirement funds. The top ten of these asset managers account for 86% of total registered retirement fund assets (KRW 1.1 trillion), with eight of them being affiliated to large service providers. The report shows Mirae Asset Investments at the top of this list, with around one-third of assets, followed by Samsung Investments with 13% of assets.
In addition to analyzing service providers and asset managers, the report also provides information on the types of pension fund products available and compares their performance results at an individual fund level. According to the report, the majority of retirement fund products are Korea Bond Balanced funds with less than 40% exposure to equities. This product category includes 114 funds managed by 33 asset managers, accounting for 78% of the total retirement fund assets.
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