South Korean retirement pension DC conversions surge amid KOSPI volatility

A surge in South Korean retirement pension subscribers switching from Defined Benefit (DB) to Defined Contribution (DC) plans during a market peak has resulted in significant losses as the KOSPI entered a downturn. Data from the Financial Supervisory Service, provided to lawmaker Park Sung-hoon, shows that between June and July this year, 149,710 subscribers converted to DC plans, an 181.2% increase compared to the same period last year.

Many of these conversions occurred around June, when the KOSPI reached a historic high. However, following the transition, the market faced a correction. Subscribers who moved funds through Mirae Asset Securities and Korea Investment & Securities between April and June saw average returns of -10.7% and -10.2%, respectively, during the July-August period.

Because DC plan assets are managed directly by the individual, they are subject to market volatility. Lawmaker Park Sung-hoon criticized the government for failing to prevent impulsive transitions driven by short-term gains, calling for enhanced risk disclosure, improved investor education, and the implementation of mandatory cooling-off periods to protect retirement funds.