Korean pension recipients channel assets into U.S. ETFs, annuities

Korean pension recipients channel assets into U.S. ETFs, annuities

최초입력 2025.08.25 11:27:44

South Korean pension recipients are increasingly managing their retirement funds via exchange-traded funds (ETFs) linked to bonds and the U.S. market, as they seek both stable cash flows and growth opportunities.
Mirae Asset Securities Co. said Sunday that individual pension recipients are investing heavily in corporate bond ETFs and U.S. index ETFs such as the S&P 500 and Nasdaq. As of the end of July 2025, the most subscribed product was TIGER 25-10 Corporate Bond (A+ or higher) Active, followed by TIGER U.S. Nasdaq 100, Mirae Asset Strategic Allocation TDF 2025 Mixed Asset CP, TIGER U.S. S&P 500, and TIGER U.S. Tech Top 10 INDXX.
The TIGER 25-10 Corporate Bond Active posted a one-year return of 3.65 percent. TIGER U.S. Nasdaq 100 returned 22.42 percent over one year, 96.94 percent over three years, 156.94 percent over five years, and 519.33 percent over 10 years. TIGER U.S. Tech Top 10 INDXX delivered one- and three-year returns of 27.84 percent and 138.39 percent respectively, while TIGER U.S. S&P 500 reported 17.47 percent over one year and 71.44 percent over three years.
Recipients of individual retirement pensions (IRPs) also favored the TIGER 25-10 Corporate Bond Active, followed by a Korea Postbank one-year deposit product, TIGER U.S. S&P 500, a Korea Securities Finance Corp. three-year deposit product, and TIGER U.S. Nasdaq 100. Deposit products yielded in the two percent range, which fell short of bond ETFs.
Mirae Asset said the three-year average annual return for pension recipients was 6.82 percent, while the top 5 percent of investors achieved 34.49 percent over the same period, underscoring the widening performance gap depending on strategy. A simulation based on a retirement principal of 300 million won ($216,500) with a monthly payout of 2 million won showed that maintaining average returns would sustain payments for 25 years, with total payouts reaching 579.8 million won. By comparison, relying solely on principal-guaranteed products with a 2.5 percent yield depleted the funds within 15 years, with payouts limited to 353.5 million won or over 200 million won less.
The demand for annuity-style withdrawals is growing at the same time, with the number of pension recipients forecast to climb to 2.6 million in five years. A Mirae Asset survey of 1,000 employees in their 50s found that 58.3 percent intended to receive retirement payouts as annuities, either fully or partially, a figure about 45 percentage points higher than the current annuity selection rate reported by the Ministry of Employment and Labor. Only 13 percent of newly activated retirement accounts chose annuity withdrawals, while 87 percent opted for lump sums, in 2024.
Preferences varied by asset size. Among respondents with more than 200 million won in retirement assets, 73 percent preferred annuities compared with 48 percent of those with less than 20 million won. This gap underscores the need to raise returns to increase annuitization rates.
A fund-based model was proposed to increase returns, but implementing this approach in the near future may be challenging. Greater reliance on existing systems may therefore be necessary to expand annuity withdrawals, particularly with baby boomers approaching the payout stage.
The effectiveness of default investment options remains a key concern in Korea. Labor ministry data show 82.6 percent of retirement assets at the end of 2024 were in principal-guaranteed products. Performance-based products returned an average of 9.96 percent compared with 3.67 percent for guaranteed products.
“The current default option system forces indecisive investors to make another choice, and its inclusion of principal-guaranteed products undermines its intended purpose,” Korea Capital Market Institute senior research fellow Nam Chae-woo said.
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Korean pension recipients channel assets into U.S. ETFs, annuities

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