IRP Savings Surpass 50 Trillion Won as Major Banks See Strong Performance

Growth is attributed

The collective savings in Individual Retirement Pension (IRP) accounts at South Korea's top five banks have surged past 50 trillion won this year. With a substantial 6 trillion won increase over just six months, the IRP sector is experiencing a significant boost. This growth is attributed to expanded tax incentives and improved retirement fund management by banks.

As of the end of the second quarter, the total IRP savings held by KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup banks reached 52.16 trillion won, marking a 14% increase from the previous year. This growth reflects the heightened interest in IRPs, spurred by an increase in the tax deduction limit from 7 million to 9 million won, which was introduced last year.

Among the top banks, KB Kookmin and Shinhan banks led the pack with IRP savings of 14.33 trillion won and 14.14 trillion won respectively, each showing a 12.5% increase. Hana Bank saw its IRP savings rise by 15.6% to 10.98 trillion won, while Woori Bank and NH Nonghyup Bank increased their IRP savings by 16.0% and 16.7%, reaching 8.17 trillion won and 4.54 trillion won respectively.

These banks have expanded their retirement fund management capabilities by establishing dedicated retirement fund centers and deploying specialized staff to enhance their management capabilities. Their efforts are focused on providing asset management services tailored specifically to retirement funds.

Furthermore, the performance of these IRP accounts has been impressive, with average annual returns exceeding 12%. KB Kookmin achieved the highest return at 13.62%, followed by Hana Bank at 13.26%, NH Nonghyup Bank at 12.9%, Woori Bank at 12.71%, and Shinhan Bank at 12.25%.

Since April of this year, the South Korean government has implemented a new system linking IRP management fees to fund performance. This change requires banks to pay closer attention to their IRP returns, as fees will decrease if their performance does not meet predefined benchmarks.

With recent challenges in other investment areas, such as the Hong Kong Hang Seng China Enterprises Index-linked securities scandal, banks are likely to focus even more on managing IRP returns to boost non-interest income. This shift underscores the growing importance of retirement fund management in the financial sector.

The significant increase in IRP savings and robust performance by South Korea's major banks highlight a positive trend in retirement planning. Enhanced tax incentives and improved management practices are driving this growth, positioning IRPs as a strong choice for investors looking for stable returns and long-term savings benefits. As banks continue to refine their strategies, IRP accounts are set to play an increasingly vital role in the financial landscape.