President-elect's youth savings program draws concerns

President-elect Yoon Suk-yeol, center, and his camp officials tasked with issues concerning young people pose with a large certificate issued by the National Election Commission for his March 9 election victory at the National Assembly in Yeouido, Seoul, March 10. Yonhap

By Yi Whan-woo

A government-assisted installment savings product being planned by President-elect Yoon Suk-yeol to support young people is drawing keen interest, but it is also fueling concerns that it will cause bigger problems than a similar one already introduced by the Moon Jae-in administration.

The envisioned product, translated as “Youth Leap,” is aimed at helping young people save up to 100 million won ($80,000) over the next 10 years, while the Moon administration's existing “Youth Hope” product offers young people maximum interest returns of 10 percent annually for the next two years.

Both programs are open to those aged between 19 and 34. But Yoon's “Youth Leap” is available to more people since it does not impose restrictions on annual salary as an eligibility criterion, whereas Moon's “Youth Hope” requires the subscriber's yearly income not to exceed 36 million won.

A promotional image for the “Youth Hope” installment savings product introduced by the Moon Jae-in administration in February / Korea Times file

The problems involving “Youth Hope” include the larger-than-expected number of subscribers and the financial burden, which the government asked commercial banks to shoulder by covering the interest and related expenses.

The number of “Youth Hope” subscribers stands at approximately 290,000, which is more than seven times what the government had predicted when it introduced the program in February.

Accordingly, the estimated amount of interest to be covered by the government turned out to be between 600 billion won and 800 billion won more than what had been projected originally.

Although the national debt snowballed, the Moon administration allocated 1.44 trillion won for the program for two years, with the goal of helping young people who are having a tough time saving money amid the pandemic.

“Against this backdrop, 'Youth Leap' has a higher risk of being trapped in inaccurate predictions, considering that it is broader in scale when it comes to eligible subscribers and benefits,” a financial market observer said.

The observer noted there are about 630,000 people between the ages of 19 and 34, and assuming that they are all eligible to subscribe, about 7.56 trillion won in taxpayers' money will be needed every year to fund the program.

“The incoming government therefore should thoroughly prepare to finance the program,” he said.

Speaking on condition of anonymity, a commercial bank employee voiced a similar view.

“The government's failures to predict the demand (for the programs) is putting a burden on banks,” he said.

Yoon's savings product could stir up additional confusion during the subscription process because it does not allow eligible clients to subscribe to both products at the same time.

Those who want to switch to “Youth Leap” from “Youth Hope” may need to qualify based on a set of criteria separate from others who join the program directly. And those who do not qualify might claim that they are being discriminated against, industry insiders point out.

The ban on dual subscriptions and mass departures from the “Youth Hope” program might correspondingly fuel a dispute over how taxpayers' funds and other efforts invested in the program were wasted in the creation of two similar programs.

Those who are unemployed or barely meet the age criteria will also miss out on the benefits of either program.