Korea's financial regulator said Tuesday it will step up supervision of banks and insurance companies to limit their risky competition in the retirement pension sector.
"Retirement pension providers are feared to engage in stiff competition to raise interest rates (on pension products) and pursue irregular sales activities in 2011 in order to win over market shares," the Financial Supervisory Service (FSS) said in a statement.
The watchdog said it will closely monitor retirement pension sales in order to prevent risky competition to provide high returns at the cost of healthy management of those pension funds.
Since first adopting the retirement pension plans provided by private banks, insurance firms and brokerage houses in 2005, the total funds under management grew to 30.4 trillion won ($27.1 billion) as of the end of January 2011, more than doubling from 14.2 trillion won recorded at the end of 2009, according to the FSS.
As of the end of January, 56 banks, life and non-life insurers and brokerage firms were servicing privately run retirement pension products.
The watchdog said the funds under retirement pension management may reach up to 53 trillion won at the end of 2011 as more companies are expected to shift to externally managed pension plans, away from internal fund deposits for severance packages. (Yonhap)