By Choi Kyong-ae
Shinhan Bank is gaining a bigger share of the annuity savings market by offering higher returns for assets under its management, the bank said Monday.
As of the end of May, Shinhan Bank ranked first with 1.8 trillion won of annuity savings, accounting for a market share of 29.5 percent, the bank said.
The concept of an annuity is described as contributing to an account monthly, usually up until age 60, and receiving guaranteed payouts in retirement that are not subject to stock market fluctuations.
The bank invested less than 10 percent of the annuity savings reserves in equities during the January-May period. It harvested an annual investment gain of 4.27 percent from the investments at a time when the benchmark interest rate fell below 2 percent.
Last month, the Bank of Korea cut its key rate to a record low of 1.5 percent after three rate cuts since August last year to support growth. But Middle East Respiratory Syndrome (MERS) has worsened spending and weighed on growth since May 20, when the first case of the deadly virus was reported in Korea.
“As Korea is becoming an aging society and the country’s average life expectancy is well over 80, retired people have a growing interest in annuity savings or retirement savings products,” a company spokesman said. “They seek products which make a stable flow of investment gains.”
Shinhan’s annuity savings products are available at outlets across the country. Consumers can buy the product through Internet banking or smartphone applications. Those who own an annuity savings account in other banks can transfer the account to Shinhan, the bank said.
Buyers of an annuity savings account usually deposit a fixed amount of money in the account until the age of 55 and receive guaranteed payouts for at least 10 years after retirement. The product is increasingly preferred by retired individuals, the bank said.
Late last year, Shinhan Bank hired experts to invest the annuity savings reserves in bonds or stocks as interest rates offered by banks are expected to fall to nearly zero soon or later, it said.
Faced with declining interest rates and squeezed margins, Shinhan is diversifying its businesses and looking to overseas markets.
In May, Shinhan Financial Group launched a laboratory to seek financial technology, or fintech, partnerships with information-technology companies.
In its latest expansionary move, Shinhan Bank plans to open its first branch in the Middle East this year after approval from United Arab Emirates financial authorities.
“Through the branch, to be established in Dubai in November, we are providing financial services to Korean companies that have advanced to the Middle East and Africa,” the bank said.