On June 6, labor, business, and government representatives in South Korea reached an agreement to enforce retirement pensions aimed at enhancing retirement income for workers. This landmark decision is the first significant overhaul of the country's retirement pension system since its inception in 2005. Although previously various government measures have sought to activate the retirement pension system, this agreement goes further by stipulating a phased obligation for all workplaces to adopt retirement pensions, thereby replacing the previous system where employers could choose between providing retirement funds or pensions. This change is crucial as only 26.5% of eligible workers are currently covered by retirement pensions, and enhancing this coverage is expected to greatly improve income security in retirement.

Furthermore, the agreement includes the introduction of new open and union-type retirement pension funds while expanding eligibility for small company funds to businesses with fewer than 300 employees. With the accumulated retirement pension reserves nearing 500 trillion won, the necessity for improved returns has become apparent, especially since the annualized yield over the past five years was only 2.86% compared to the National Pension’s 8.13%. The activation of fund-type arrangements is expected to enhance investment expertise and economies of scale, ultimately leading to better returns for retirement plans. Previously, only small companies with under 30 employees could access such funds, primarily through traditional contracts with financial firms.

Despite some opposition from the ruling People Power Party, which accused the agreement of infringing on private property rights, the new framework represents a critical initial step toward strengthening the role of retirement pensions. However, numerous challenges remain ahead, including establishing specific timelines for the mandatory implementation of pensions, measures to ensure compliance, and government support strategies to alleviate the burden on smaller businesses. As the country moves forward, addressing these concerns will be essential to realize the full potential of this reform in securing financial stability for retirees.