ETFs available for purchase in a pension savings fund are limited to ETFs listed on domestic exchanges. ETFs directly listed on overseas exchanges cannot be purchased, and leveraged and inverse ETFs are also prohibited. So ETF selection in a pension account starts not with "which index will rise" but with "what is permitted in this account, and what is the confirmed cost." As directly calculated below, a 0.5 percentage point difference in total fees separates approximately 11 million won over 20 years of 6 million won annual contributions.
Which ETFs Can Be Held in Pension Savings — How Far Does It Go?
According to the summary in Mirae Asset Securities Magazine, both pension savings and IRP can only trade ETFs listed domestically. S&P 500 and NASDAQ 100 tracking ETFs listed domestically are permissible, so the range of index choices is broad — but leveraged ETFs (moving 2–3x the index) and inverse ETFs (moving opposite to the index) are prohibited in both accounts.
The differences come next. IRP cannot hold ETFs where the derivative risk assessment amount exceeds 40% — such as crude oil futures-based or gold futures-based products, or dollar futures-based products — and can invest no more than 70% of contributions in risky assets. Pension savings, on the other hand, has no risky asset allocation restriction, allowing 100% equity ETF investment, and without the derivative risk ratio regulation, even commodity futures ETFs can be held. Korea Economic Daily noted that even in IRP, allocating at least 30% to bond ETFs allows the entire contribution to be managed in ETFs.
| Category | Pension Savings Fund | IRP |
|---|---|---|
| Risky asset (equity ETF) limit | No limit (100%) | 70% of contributions |
| Leveraged / inverse ETFs | Prohibited | Prohibited |
| Overseas-listed ETFs | Prohibited | Prohibited |
| Derivative risk >40% (commodity futures, etc.) | Permitted | Prohibited |
| Annual tax credit limit | 6 million won | 9 million won (combined with pension savings) |
The tax credit limit (pension savings 6 million won, IRP combined 9 million won — based on KB Kookmin Bank's summary) and the refund structure are covered in Pension Account Tax Credit Calculation. This article addresses the next step: criteria for deciding what to hold with the money once the limit is filled.
TR ETFs Are Now Only Domestic Equity Type — Mandatory Distribution from July 2025
TR (Total Return) ETFs, which automatically reinvested distributions within the fund to compound growth, were a staple of pension accounts. However, following an amendment to the Income Tax Act Enforcement Decree, interest and dividends generated within funds from July 1, 2025 onward must be distributed at least once a year. Based on Samsung Asset Management's notice, overseas equity, overseas bond, domestic bond, and interest rate types are all covered, and only domestic equity type TR ETFs retain the option to defer interest and dividend distributions.
The actual impact on pension account investors is smaller than on general accounts. Even when distributions are paid out, tax deferral is maintained within the account, and repurchasing maintains the compounding structure. The problem is that the "automatic" part has disappeared. Distributions accumulate as cash, and repurchasing is now the investor's responsibility. For those who go months without checking their accounts, cash balances will quietly grow — this will be the most common form of value leakage in pension accounts holding overseas index ETFs over long periods.
A 0.5 Percentage Point Fee Difference — How Far Does It Diverge Over 20 Years?
If tracking the same index, the remaining differentiator is cost. Assuming 6 million won contributed at year-end annually (the tax credit limit) with a pre-fee annual return of 6%, the accumulated balances were directly calculated for total fees of 0.05% and 0.55% per year (a 0.5 percentage point difference) using annual compounding.
| Contribution Period (Principal) | Total Fee 0.05% p.a. | Total Fee 0.55% p.a. | Difference (million won) |
|---|---|---|---|
| 10 years (60 million won) | Approx. 78.9 million won | Approx. 77.07 million won | Approx. 1.83 |
| 20 years (120 million won) | Approx. 219.55 million won | Approx. 208.1 million won | Approx. 11.45 |
| 30 years (180 million won) | Approx. 470.21 million won | Approx. 430.85 million won | Approx. 39.36 |
The structure is the same whether or not the return assumption is exactly 6%. Fee differences are extracted with certainty every year regardless of whether markets are good or bad, and they compound as the contribution period lengthens. A pension account is an account that runs for decades — making it more sensitive to fees than almost any other account type.
Returns are set by the market, but fees are a confirmed cost locked in by contract — in long-horizon accounts, reducing costs is the only guaranteed source of excess return.
What Differentiates the Same Index?
First, look at the actual cost burden rather than just the total expense ratio. Beyond the stated total expense ratio, additional costs and trading/brokerage commissions are added separately — comparing the combined cost from asset manager and Financial Investment Association disclosures reveals the actual difference between ETFs tracking the same index. Second, the distribution method: overseas index types are now all distribution-based, so whether you can diligently reinvest distributions yourself is intertwined with your investment habits. Third, currency hedging: even for the same index, whether (H) appears at the end of the name changes the return structure — this structure is calculated in Currency-Hedged vs. Unhedged ETF Differences. Fourth, net asset size and trading volume: ETFs that are excessively small carry the burden of bid-ask gaps and premium/discount concerns, and the possibility of delisting cannot be ruled out.
What to Watch
- Account type-specific restrictions — for IRP, check the margin of the 70% risky asset limit and what to use for the 30% safe asset requirement
- Total fee plus other costs for held ETFs — actual cost difference between ETFs tracking the same index (based on asset manager and association disclosures)
- Distribution payment history and reinvestment status for overseas ETFs after July 2025 — cash proportion sitting idle in the account
- Whether annual tax credit limits (pension savings 6 million won, IRP combined 9 million won) have been fully used — year-end contributions are based on the trade settlement date
- Distribution conversion notices for held TR ETFs — product-by-product change details in asset manager announcements
References
- Mirae Asset Securities Magazine — ETFs That Can Be Invested in via Pension Savings, IRP, and ISA
- Korea Economic Daily — ETFs Available in IRP: What Options Are There?
- KB Kookmin Bank — Pension Savings Fund vs. IRP Differences
- Samsung Asset Management — Notice on TR ETF Distribution Method Changes Under Income Tax Act Enforcement Decree Amendment