Professor Youngju Nielsen of SKK GSB, a retirement planning expert, met with Pål Bergström, the CEO of AP7, Sweden's public pension institution.

The Korea Economic Daily interviewed Professor Nielsen and CEO Bergström to uncover the key to Sweden's position as having the highest return of any National Pension Fund in the world.

South Koreans mainly pay into a capital-guaranteed retirement pension, which has an average return rate of only 1.8%. Whereas, Swedes pay 16% of their income into a pension similar to the Korean National Insurance Fund, and 2.5% of the income goes into the premium pension where they can choose their investment options.

If a premium pension plan participant does not choose a pension management company or product, 2.5% of their income goes into the AP7, the National Insurance Fund. AP7's recent 10-year return rate is an annual average 15%, making it the top public pension.

The key to AP7's high return rate was raising stock allocation to 90%.

Professor Nielsen and CEO Bergström collectively argued that the stock allocation of the retirement pension should be raised, which would provide South Koreans could receive a pension that ensures a financially secure retirement.

Original article: https://www.hankyung.com/article/2024112534581