South Korea’s state pension fund, the country’s main retirement plan, is in need of a major reform centered on cutting off excessive government intervention, an insider said Monday.

Jeong Woo-yong, a member of the National Pension Service’s Fiduciary Liability Committee, pointed out that the fund’s key decision-making bodies consist of “too many” government officials and lack economic experts. This hinders the fund’s growth, as it increases the fund’s vulnerability to being abused in different government projects with a lack of experts -- leading to lackluster profitability, he explained.

“Today, six of 20 members of the NPS’ Fund Management Committee -- the fund’s top decision-makers in terms of actually handling the money -- are government officials,” Jeong said at a press conference held at the National Assembly to improve the NPS’ governance structure.

“This makes it difficult for the NPS to be free from government intervention. The previous two administrations made attempts to use the state fund for its own projects, but they should not even think of touching the state retirement plan because it’s not their money,” he added.

Jeong pointed out that the current system does not hold the key decision-makers at the fund accountable for their choices in managing the fund.

“Managing such a big fund comes with great responsibility, but the current system allows the decision-makers to slip away.”

Major state pension funds overseas including the Canada Pension Plan, the Norwegian Government Pension Fund Global and Japan’s Government Pension Investment Fund do not have government officials as top decision-makers, according to data provided by Jeong.

The Canada Pension Plan Investment Board, the counterpart to the NPS’ Fund Management Committee, currently consists of 12 private economic and financial experts with no government officials. The top fund managing teams of the Japanese GPIF and the Norges Bank Investment Management -- which manages the Norwegian GPFG -- consist of eight and ten private experts, respectively.

Meanwhile, the NPS’ profitability has fallen behind its key global counterparts, according to Finance Ministry data released by Jeong.

Korea’s state pension fund posted a return on investment of 10.86 percent last year, below that of the Japanese state pension fund at 12.62 percent and Norway's state pension fund at 14.51 percent.

“The NPS’ main goal of reform should be achieving a solid return on investment to ensure the Korea citizens’ retired life in this aged society,” Jeong said.

Other experts who spoke at the press conference also criticized the NPS’ stewardship code, first adopted in 2016 for the purpose of guiding shareholders to exercise their voting rights for steering businesses in the “right direction.” The code, however, despite its initial purpose, has become what some call a "tool” for the government to pressure businesses to serve its political agenda.

“The stewardship code has become a tool for the government to use the NPS as an excuse to control local businesses according to their political agenda,” Choi Joon-seon, an honorary law professor at Sungkyunkwan University said.

The NPS, which manages some 930 trillion won ($671 billion) of assets, has invested more than half of the total money into local businesses by purchasing their bonds and shares. It held over a 5 percent stake in 263 companies and over a 10 percent stake in 45 firms as of end-2021, giving it power to exert its stewardship code over such businesses.

“We should all ask ourselves the question of whether the NPS should be involved in the managing process of private businesses,” Chae Joon, a business professor at Seoul National University said.