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Photo courtesy of Yonhap News |
[Alpha Biz= Paul Lee] Controversy is growing over the compensation system at South Korea’s National Pension Service (NPS), as record investment returns since 2023 have not translated into competitive pay for fund managers.
According to industry sources on the 28th, dissatisfaction is rising within the NPS investment division ahead of finalizing 2025 performance bonuses, with many arguing that compensation levels remain disproportionately low compared to performance.
Despite posting a strong 18.82% return last year, bonuses have declined sharply. Data from the office of a lawmaker from the Democratic Party of Korea show that average bonuses for senior portfolio managers fell 55.8% from KRW 169.2 million in 2020 to KRW 74.7 million in 2024. Bonuses for other investment roles also dropped by more than 50%.
The decline is largely attributed to the NPS bonus structure, which is based on three-year excess returns over benchmark performance rather than single-year absolute returns. Even with high annual returns, bonuses may remain limited if benchmark thresholds are also elevated.
Internal tensions are also growing over disparities between investment divisions. While domestic equity managers delivered returns exceeding 80%, alternative investment managers posted around 8%, yet compensation differences between teams could reach up to tenfold, fueling debate over fairness.
Over the past five years, 127 investment professionals have left the NPS—an average of about 25 per year—raising concerns that the organization is struggling to retain experienced talent.
In contrast, global pension funds treat compensation as a key tool for performance management. For example, Norges Bank Investment Management (NBIM) paid an average of approximately KRW 250 million per employee in performance bonuses last year.
Although the NPS recently adjusted its bonus calculation base to 1.5 times total base salary, critics say the changes are insufficient to bridge the gap with private-sector compensation or address internal disparities.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
