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Korea financial authorities brace for aging society
Publication Date : 10-08-2013
Financial authorities recently set up a task force to map out policies to deal with the nation’s fast transformation into an aging society.
The move comes after Financial Services Commission Chairman Shin Je-yoon instructed the regulatory staff to establish a new policy paradigm, which would actively foster the pension market amid the so-called centenarian era.
“We’ve decided to closely coordinate the administration’s social welfare policy in anticipation of the aging society with the average life expectancy of 100 years,” said an FSC director general.
Though the official said detailed countermeasures were to be drawn up by the task force, he predicted that the coming vision would be focused on systemising the pension market in terms of both product diversification and effective supervision.
He added that policymakers were seeking to resolve a variety of difficulties in the saturated local financial market by encouraging banks and insurance firms to develop products such as a retirement pension, pension fund, pension savings and annuity insurance.
In addition, in a bid to effectively benchmark conditions in Europe and the US, the FSC plans to spur business activities of foreign financial firms operating in Korea.
FSC chief Shin said in July that he that foreign firms would play a pioneering role in creating and attracting new financial demand amid the aging society.
During an international conference held in Seoul in June, global financial leaders shared the view that the world’s biggest insurance firms were likely to vie for the Asian pension market in the coming years.
There are substantial growth opportunities for insurers in the Asia-Pacific region involving Korea, said some participants for the 49th annual seminar of the International Insurance Society.
Meanwhile, according to data released by an Australian research centre, South Korea’s retirement pension system is among the worst in the world at the present stage.
The Australian Centre for Financial Studies’ October 2012 Melbourne Mercer Global Pension Index showed that Korea ranks 16th of 18 researched countries in terms of the retirement income system, marking an overall index value of 44.7.
Denmark topped the list with 82.9 points. China came in 15th with 45.4 points, Japan 17th with 44.4 points and India 18th place with 42.4 points. The centre took into account more than 40 indicators for the evaluation.
On a scale from A to E (best to worst), Korea belonged to category D, meaning that the system had some desirable features, but also major weaknesses and/or omissions that needed to be addressed.
Reasons for the low grade included the low income replacement rate of public pensions, low subscription rate of private pensions, low fertility rate and an aging society.