South Korean financial authorities and the Ministry of Employment and Labor are pursuing activation of retirement pension collateral loans through amendment of the Retirement Benefit Act. The initiative aims to prevent mid-term withdrawals by pension holders who need emergency funds and strengthen stable retirement security through maturity receipt. According to government officials on the 12th, the move responds to rising social demand for housing purchase funds and rental deposits among non-homeowners, as well as medical expenses for dependent family members, while considering the scale of retirement pension reserves which reached 501.4 trillion won as of end of last year—double the 255.5 trillion won in 2020. Mid-term withdrawal cases totaled 67,000 in 2024 with 82% being non-homeowners withdrawing for housing purchase or rental deposit purposes.
Mid-Term Withdrawals Reach 2.7 Trillion Won in 2024
Mid-term withdrawal amounts for housing purchase funds, rental deposits, and medical expenses totaled 2.7 trillion won in 2024, up 12.1% from the previous year. A government official stated that the scale is estimated to have grown further considering the recent stock market boom. Among retirement pension accounts that began receiving benefits last year, only 16.5% chose pension-format receipt while lump-sum receipt remained dominant at 83.5%.
According to the National Data Agency, housing purchase accounted for 56.5% of mid-term withdrawal reasons. Rental deposit payments comprised 25.5%, personal rehabilitation procedures 13.1%, and medical expenses for the account holder, spouse, or dependent family members 4.4%. For those in their 20s, rental deposit payments accounted for 42.4% of withdrawals and rehabilitation procedures 18.6%—higher than other age groups. For those aged 60 and above, rental deposit payments reached 29.2% and long-term care expenses 12.7%.
Average Pension Receipt 148.91 Million Won vs Lump-Sum 18.33 Million Won
Mid-term withdrawals reduce the total amount received and shift receipt format from pension to lump-sum, undermining retirement security. Account holders receiving retirement pensions in monthly or quarterly formats average 148.91 million won, while lump-sum recipients average only 18.33 million won—a significant gap.
Kim Dae-hwan, professor at Dong-A University, emphasized at a seminar that "activating collateral loans on reserves is necessary to enable subscribers to maintain their retirement pension systems for as long as possible."
Financial Industry Supports Collateral Loan Activation
The financial sector welcomes retirement pension collateral loan activation. A senior financial industry official stated that "when retirement pension subscribers suddenly need a large sum, receiving a collateral loan is more advantageous than general credit loans in terms of interest rates and limits," adding that "repaying principal and interest monthly and receiving pension format upon reaching the benefit age is most advantageous and rational for subscribers. The industry has continuously proposed this."
Another senior financial industry official explained that "mid-term withdrawals are perceived as a form of customer attrition from the pension operator's perspective," noting that "it is beneficial in terms of preventing customer attrition, and from an implementation perspective, pension loans are not difficult to design or implement because they are collateralized products."
FAQ
What is South Korea's retirement pension collateral loan initiative?
South Korean financial authorities and the Ministry of Employment and Labor are pursuing activation of retirement pension collateral loans through amendment of the Retirement Benefit Act to prevent mid-term withdrawals and strengthen retirement security through maturity receipt.
Why do South Korean pension holders withdraw funds early?
According to the National Data Agency, housing purchase accounts for 56.5% of mid-term withdrawal reasons, rental deposit payments 25.5%, personal rehabilitation procedures 13.1%, and medical expenses 4.4%. Among 67,000 mid-term withdrawal cases in 2024, 82% were non-homeowners withdrawing for housing purchase or rental deposit purposes.
