Corporate retirement pension funds managed by South Korea's financial firms posted poor returns in 2018 amid low interest rates, market data showed Monday.
Most of those retirement pension funds saw their yields hover below the 2 percent mark last year, with the best performer chalking up a return rate of a mere 2.11 percent.
Market watchers attributed the low returns to the fact that the bulk of those funds are plans that guarantee principal and interest, and invest in low-yielding vehicles, such as bank deposits, insurance products and state bonds.
Those investment products are linked to interest rates. South Korea's benchmark interest rate was 1.5 percent before the Bank of Korea hiked it by a quarter percentage point in November.
Market watchers said the effective return rate of those retirement pension funds were in negative territory last year, given the country's inflation rate and related costs.
South Korea's consumer prices rose 1.5 percent in 2018 from the previous year.
In 2017, the average return of corporate retirement pension funds came to 1.88 percent, lower than the country's consumer inflation rate of 1.9 percent.
The retirement pension scheme, which was adopted in 2005, is meant to help fund retirees' severance payments. Companies and employees make contributions to the pension funds, and employees can receive the pension after their retirement.
Retirement pension plans that guarantee principal and interest account for the bulk of the total, while the remainder are schemes that pay returns from investment.(Yonhap)
Cho Kuyung-hee email@example.com