Public Outcry as National Pension Service Faces Criticism Over 30 Billion Won Performance Bonus Pool Despite Lower Returns

Even if the National Pension Service fund investment returns drop to about half of last year's level, analysis shows that investment staff could still be paid more than 30 billion won in performance bonuses.

Averaging about 75 million won per person, criticism has been raised that the performance bonus evaluation criteria are excessively low.

According to the National Assembly and other sources, assuming the NPS fund investment return rate drops from last year's 18.97% to the 10% range this year, the performance bonuses to be paid to fund management staff are estimated at 30.886 billion won.

Based on 410 investment employees, this averages out to approximately 75 million won per person.

While the return rate decreases by about 47% compared to last year, the performance bonuses decrease by only 31.6%, still exceeding 30 billion won.

The evaluation method used for National Pension Service performance bonuses has been pointed out as the reason for this outcome.

The NPS has introduced an absolute performance evaluation for calculating performance bonuses starting last year.

Unlike relative performance, which evaluates how much higher profits were generated compared to the market average, absolute performance measures how much a predetermined target return rate has been exceeded.

The problem is that the target return rate set by the National Pension Service is 5.5%.

Over the past five years, the average return rate of the National Pension Service was about 9.75%, and the market benchmark return rate was also about 9.59%, meaning the absolute performance evaluation criteria were set much lower than these figures.

This is even lower than the 7% to 8% suggested as performance compensation standards in the private asset management industry.

Because of this, analysis indicates that even if this year's fund return rate stops at 10% and the market benchmark return rate reaches 20%, a perfect score can still be obtained in the absolute performance category.

Performance bonuses at the National Pension Service consist of 40% relative performance, 30% absolute performance, 10% organizational performance bonuses, and 20% long-term tenure performance bonuses.

Politicians are criticizing the structure, stating that performance bonuses are determined by market conditions and low target return rates rather than the actual performance of investment staff.

However, the 30.8 billion won presented this time is not a confirmed amount, but an estimate calculated by assuming this year's return rate and market benchmark return rate at 10% and 20%, respectively.

Actual performance bonuses are scheduled to be paid in July of next year, reflecting this year's investment performance.

The National Pension Service explained, "Performance bonuses are calculated based on a 5-year long-term performance rather than a 1-year short-term performance," adding, "A 1% increase from the existing 4.5% return rate extends fund depletion by 7 years, which is why we adjusted the target return rate to 5.5%."

They added that compensation issues have been cited as the cause of frequent turnover among fund headquarters employees, and the performance bonus system was modified to improve their treatment.

As the controversy arose, National Pension Service Chairman Kim Sung-joo stated, "We will prepare improvement measures by the end of the year."

(Reported by Kim Minjeong | Video Editing by Hong Jinyoung | Design by Yang Hyemin | Produced by SBS Digital News)
※ Please note: This article was translated by AI and may contain errors.