South Korea’s NPS Ends Samsung Trading After “Fat Finger” Folly

After a “fat finger” error last week, South Korea’s largest pension fund is severing ties with Samsung Securities.

The incident occurred Friday, when a Samsung employee accidentally issued 2.8 billion shares to employees instead of the dividend payouts promised to workers part of the stock ownership scheme. However, the situation did not become apparent until 37 minutes later, when the company discovered that 16 employees had hastily sold off their erroneous stock, valued at $186.9 million.

While last Friday may have been a great day to be a Samsung employee, Samsung Securities has fallen 10% and lost roughly $330 million from its market value. The titanic mistake was also the straw that broke the camel’s back for the 633 trillion won ($595 billion) National Pension Service, as the world’s fourth-largest pension fund stopped orders with the Seoul-based fintech company almost immediately. A spokesman told The Wall Street Journal that “concerns of poor safety measures following the financial incident” was the key reason it stopped orders with the company.

Worth nearly $105 billion, the mistaken 2.8 billion shares represented more than 30 times the number of Samsung’s outstanding shares. Samsung Securities has launched an investigation into its internal systems and controls and has also promised to compensate investors for the dividend debacle. According to the WSJ, the Korea Securities Depository said the perilous transactions involving the Samsung shares had been fixed.

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The Samsung employee who made the mistake, as well as those who cashed in after being told not to, have been temporarily suspended.

Tags: National Pension Service (NPS), Samsung Securities, South Korea

A UK Parliament committee has proposed that the National Employment Savings Trust (NEST), a government-backed defined contribution pension established to support automatic enrollment, provide a “default decumulation pathway” to protect less-engaged participants entering retirement.

In the final report of its inquiry into pension freedom and choice, the Work and Pensions Committee has called for a simple package of measures to create better informed, more engaged pensions savers. The committee said that a default impartial guidance appointment just before participants access their pensions as they retire would result in better consumer outcomes.

“Far too many people are currently taking vital decisions in the dark, putting them at greater risk of suffering irrevocable financial detriment through scams or choices contrary to their interests,” said the report. “As ever greater numbers of auto-enrolled savers approach retirements during which they will rely on defined contribution pots for retirement income, the need to boost engagement with pension guidance will grow increasingly acute.”

In its recommendations, the committee said the government should allow NEST to provide decumulation products beginning a year from now, including a new default drawdown pathway that would allow participants to move their money wherever they wanted.

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“Every pension provider offering drawdown must, by April 2019, offer a default de-cumulation pathway suitable for their core customer group,” said the committee, “subject to oversight by existing independent governance committees, and subject to the same 0.75% charge cap already in place for accumulation in automatic enrolment.”

The committee also recommended a single, publicly hosted pensions dashboard that covers state, defined contribution, and defined benefit pensions, which would be funded by the industry levy, and in place by April 2019. It said that the multiple dashboards currently planned, and hosted by “self-interested providers,” would only “add complexity to a problem crying out for simplicity.”

It said that competition between pension providers over the presentation of the required information risks countering competition in the pensions market.

“Instead, government should mandate all pension providers to provide the necessary information to the single pensions dashboard, hosted by the new single financial guidance body,” said the committee. It added that single page pension passports increase consumer engagement with pensions options, and that pension providers should therefore be required to issue them.

“Automatic enrolment has been a runaway success, bringing millions of people on board in saving for their retirement,” said Frank Field, chair of the committee, in a release. “We want to expand that success story so that everyone, no matter how they are saving, has a simple, suitable, default pension option, with a low, capped fee.”

Tags: National Employment Savings Trust (NEST), Pension, UK, Work and Pensions Committee