When selecting retirement pension products, subscribers typically focus on returns, but another crucial factor is fees. Even with similar returns, the fees can differ significantly, sometimes by dozens of times, making it essential to consider costs as well.
An analysis of the Financial Supervisory Service's disclosure data on retirement pension providers revealed substantial disparities in fee burdens, even among similar types of plans. The fee burden refers to the costs incurred by subscribers for management and asset handling, which are deducted from assets annually and can significantly affect compounding over the long term.
For instance, as of the fourth quarter of last year, Shin Young Securities reported a total fee burden rate of 0.126% for its defined benefit (DB) plans, while Mirae Asset Securities had a rate of 0.399% and iM Securities reported 0.386%. This indicates that even within the same sector, the fees borne by subscribers can vary by more than three times.
The fee burden rate is calculated by adding management and asset handling fees, which are often lower for non-face-to-face products or promotional offerings. This month, Kiwoom Securities, a new entrant in the retirement pension market, announced a zero percent fee for the first year.
However, a higher fee does not always correlate with higher returns. For example, based on a 10-year non-guaranteed principal and interest return, KB Insurance achieved a return of 4.56%, while DB Insurance reported 4.62%, with a performance difference of just 0.1 percentage points. The differences become more pronounced across different sectors. For instance, Woori Bank's Individual Retirement Pension (IRP) had a three-year return of 13.24%, while Fubon Hyundai Life Insurance reported 12.32%. However, the fees were drastically different, with Woori Bank at 0.007% and Fubon Hyundai Life at 0.347%.
These figures reflect the cost levels at the time of disclosure, and individual returns may vary based on the specific products and asset allocations chosen by subscribers. Nevertheless, relying solely on return rankings when selecting a provider can obscure a complete assessment of actual investment performance.
A financial industry official noted, "Given that retirement pensions are long-term assets managed over 20 to 30 years, even small differences in fees can accumulate over time." This means that even a 0.1 to 0.2 percentage point increase in annual fees can significantly impact the final payout when compounded over the long term.
* This article has been translated by AI.
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