National Pension Fund Management to Go Private
By Bae Ji-sook
Staff Reporter
A group of private fund managers will take over managing the more than 200 trillion won ($220 million) National Pension Fund as part of moves to maximize the fund's investment returns.
Vice Minister of Health, Welfare and Family Affairs Lee Bong-hwa said Wednesday that a committee of seven investment experts with more than 10 years experience will have full autonomy in managing the fund.
``It will run independently from the welfare ministry. It will be run like the independent Monetary Policy Committee of the central Bank of Korea,'' she said.
The three-year-term committee members will be nominated by the health minister and appointed by the President. They will be from non-political and non-governmental fields and be paid ``extra'' salary.
To guarantee autonomy, a public corporation will be established to implement the direction of the committee. It will be an expansion of the fund management team inside the National Pension Service (NPS). The corporation will also have autonomy in budget planning and personnel management.
Still, the ministry will require a minimum amount of annual returns from the committee and have the right to conduct an annual audit and evaluation to ensure full accountability.
The government expects strong gains from the reform proposal that will go into effect next year once the revised law is passed at the National Assembly in June.
``Also we expect the fund to be independent from politics, which will make more people trust its management,'' Lee said.
The reform in pension fund management came after the NPS was criticized for its inefficient and poor management of the huge fund.
If investment returns are not improved markedly, younger contributors will have to pay more than the current generation, but will receive lower pensions. There is speculation that the fund will dry out by 2047.
The NPS has said that it will take a more ``aggressive'' stance in investing ― in hedge funds and other highly risky investments. It claimed these new investment methods will delay the ``dry-up'' time to the 2060s.