President Lee Jae-myung pours water on a KOSPI ticker symbol engulfed in flames, but the source of the water is the cracking National Pension Service building. This image symbolically represents a structure that seeks to mobilize the National Pension Service as a tool for stock price defense under the pretext of "preventing a 'Sam-Jeon-Nix' selling bomb." [Photo: Hanmi Ilbo Graphics]

It has been reported that Representative Park Sun-won of the Democratic Party of Korea is pushing to lead a proposed amendment to the National Pension Act, ostensibly to prevent what is being called a "Sam-Jeon-Nix selling bomb" by the National Pension Service. "Sam-Jeon-Nix" is a market portmanteau for Samsung Electronics and SK Hynix.

The core of the reported amendment is to allow the National Pension Service (NPS) to adjust target asset allocations or temporarily defer the buying and selling of assets when there are reasons stipulated by Presidential Decree, such as sudden fluctuations in financial or foreign exchange markets. In such cases, the process is understood to involve deliberation by the National Pension Fund Management Committee and reporting by the Minister of Health and Welfare to the relevant standing committee of the National Assembly.

The superficial justification is clear: as a sharp rise in the KOSPI has caused the NPS's domestic stock allocation to exceed its target, the bill aims to prevent the NPS from mechanically selling large-cap stocks like Samsung Electronics and SK Hynix, which would shake the market.

However, this bill cannot be viewed merely as a "selling bomb prevention act." The essence of the matter is to what extent the NPS's rebalancing principles can be politically suspended. More fundamentally, the question arises: is this legislation designed to redistribute the burden of government-led stock price defense onto the National Pension Service, the general public, and individual investors?

Rebalancing is not a device to prevent selling bombs

First, we must confirm the nature of rebalancing. Rebalancing is not a device for suppressing stock prices. It is a risk management tool designed to prevent the NPS from becoming excessively exposed to specific assets, markets, or stocks.

The NPS fund management principles include profitability, stability, public nature, liquidity, sustainability, and operational independence.

The principle of stability means keeping the volatility and loss risk of overall returns within an allowable range, while the public nature principle implies considering the ripple effects the scale of the NPS has on the national economy and domestic financial markets. The liquidity principle also stipulates that measures must be taken to minimize shocks to the domestic financial market when disposing of assets. At the same time, the principle of operational independence aims to ensure that these principles are not undermined for other purposes.

Therefore, operational flexibility may be necessary to reduce market shocks. However, the situation changes the moment stock price defense becomes the objective itself.

While the National Pension Service may be a "big hand" in the market, it is not the administration's stock market defense unit. Although the NPS invests in financial markets, its essence remains a social security fund managing subscribers' retirement funds.

Temporary deferral → Higher target allocation → Legislative amendment

The National Pension Service has already raised its defensive barrier once.

On May 28, the National Pension Fund Management Committee significantly raised this year's domestic stock target allocation from 14.9% to 20.8%. The government explained this decision as a reflection of the actual increase in domestic stock holdings and the need to mitigate the market impact of rebalancing. It also decided to maintain the 20.8% domestic stock target for 2027.

The problem is that it did not end there.

Market estimates have suggested that if the NPS were to only apply its Strategic Asset Allocation (SAA) tolerance range when the KOSPI hits 8,500, a rebalancing sell-off of 51 trillion won could occur. This calculation is based on the assumption that if the KOSPI reaches 8,500 at the end of June, the NPS's domestic stock holding ratio would reach 29.6%, exceeding the 26.8% limit (target plus SAA tolerance) by 2.8 percentage points.

At first, it was a temporary deferral. Then, it was an increase in target allocation. Now, with limits being reached again, the next step is legislative amendment.

Looking at this progression, it is difficult to view the "Park Sun-won Act" as merely a "Sam-Jeon-Nix selling bomb prevention act." This is why critics argue that the government and the ruling party are attempting to institutionalize the NPS's role in stock price defense through legislation.

This leads to a simple question:

If the limit is reached at 8,500, will they increase it again at 9,000? Will they raise it again if it surpasses 10,000? If that happens, the NPS target allocation ceases to be a long-term asset allocation benchmark and becomes a political number dragged along by the KOSPI index.

This is a structure where market and politics push aside the rebalancing principle, rather than the principle managing the market.

Is expanding domestic stock allocations and deferring rebalancing truly a solution? The answer is negative. This is closer to a temporary patch than a solution. More accurately, it is an attempt to use the NPS's asset allocation principles to cover up the aftermath of a stock market rally engineered by the government.

If they sell, individual investors get hit; if they don't, the public's retirement fund gets hit

The government and the ruling party might speak of "protecting retail investors." Indeed, the leverage of individual investors is at a dangerous level.

According to the Korea Financial Investment Association, the outstanding balance of credit loans for stock purchases hit an all-time high of 38.5311 trillion won as of June 22. The balance for the KOSPI market also rose to 29.4707 trillion won.

If the NPS sells according to its principles, the first to be hit are individual investors who entered at the peak. In particular, individuals who bought stocks with credit loans face the dual risks of stock price declines and forced liquidation.

Conversely, if the NPS defers selling and holds onto a higher domestic stock allocation, only for the market to crash, the loss becomes the burden of all NPS subscribers.

If they sell, the retail investors get hit; if they don't, the public’s retirement funds get hit. Yet, the government and politicians who created this situation can hide behind words like "market stability," "legal procedures," and "deliberations by the Fund Management Committee." It is a structure where the government takes the credit, while the public and retail investors bear the losses.

The responsibility for this situation cannot be shifted to individual investors. It was not the retail investors who brought the NPS in as an ally to boost the stock market. The government turned the KOSPI rise into a political achievement and signaled the potential for expanding the NPS’s domestic stock allocation to the market. As a result, the limit issue arose, and now it has reached the stage of creating a legal loophole for deferring sales.

The political door of Presidential Decree

An even bigger problem is the reliance on Presidential Decree. The reported amendment creates a structure where target allocation adjustments and trading deferrals are possible when there are reasons stipulated by Presidential Decree, such as sudden fluctuations in financial or foreign exchange markets. If the law does not strictly define the conditions, duration, limits, and post-event accountability, but instead delegates them to a Presidential Decree, the government's discretion grows.

If the exceptions are broadened by Presidential Decree, the NPS’s rebalancing principle could deteriorate into a policy tool that the government can adjust depending on market conditions.

Phrases like "sudden financial market fluctuations," "foreign exchange market instability," and "large-scale supply/demand shocks" sound plausible on their own. However, if the criteria are loose, they can become a pretext for stock price defense at any time.

The bill might put forward the fact that it requires deliberation by the Fund Management Committee as a safety device.

However, if the structure involves a Presidential Decree setting the exceptions, the government demanding a deferral on grounds of market volatility, and the Committee then deliberating on it, the space for the Committee's independent judgment narrows significantly.

Will the Fund Management Committee become a puppet?

The National Pension Fund Management Committee is the key body that deliberates and decides on the investment policies and operational guidelines for the National Pension Fund. The National Pension Service's Fund Management Headquarters also explains that the grand principles for managing and operating the fund are set by the National Pension Act, and specific investment policies are established through guidelines deliberated and decided upon by the Committee.

However, if the exceptions are broadened by Presidential Decree and the government demands adjustments or deferrals citing market volatility, the Committee could be pushed into an institution that merely endorses government decisions rather than acting as an independent body.

While it may look like the law is easing the burden on the Committee, it may, conversely, undermine the very reason for its existence.

If the Committee, which was created to ensure the long-term profitability and risk management of the NPS, turns into a body that rubber-stamps the administration's stock price defense decisions, this represents a regression in the governance of the National Pension Service.

The Park Sun-won Act may appear to be a law that eases the Committee's burden, but in reality, it could turn the Committee into a puppet.

Why Park Sun-won?

The identity of the proposer is also worth examining.

Representative Park Sun-won of the Democratic Party is not a pension policy expert belonging to the Health and Welfare Committee. Park has been active in the National Defense and Intelligence committees, and as a foreign affairs, security, and intelligence figure, he served as the Planning and Coordination Office Chief and the First Deputy Director of the National Intelligence Service under the Moon Jae-in administration.

Of course, members of the National Assembly can propose bills even if they are not in the relevant standing committee. However, the fact that a bill opening exceptions to NPS rebalancing came from a defense and intelligence-line lawmaker, rather than one from the pension and welfare committee, raises questions.

Is this a genuine discussion on pension management, or a market management message at the administration level?

The flow of personnel at the Ministry of Health and Welfare should also be observed.

Under the National Pension Act, the chairperson of the National Pension Review Committee is the Vice Minister of Health and Welfare. This committee deliberates on matters regarding the pension system, financial projections, benefits, premiums, and the fund itself.

Lee Seul-ran, former First Vice Minister of Health and Welfare, was regarded as having deep expertise in the pension policy line. In contrast, Hyun Soo-yeop, the current First Vice Minister, has been introduced as an administrative official for health and welfare who has worked across emergency medical care, insurance, childcare, and health technology development.

Current Vice Minister Hyun was appointed on May 15, and reports at the time noted that the former Vice Minister, Lee Seul-ran, was replaced after serving less than a year.

The timeline—shifting from a pension expert First Vice Minister to an administrative-type one, followed by a significant increase in domestic stock target allocations and discussions on rebalancing exceptions—is not something to be taken lightly.

Questions arise as to whether it has become difficult for the Fund Management Committee to continue bearing the political burden, and if this law is intended to ease that burden while simultaneously opening the door to a political decision-making structure through Presidential Decree.

It is not defense, but a redistribution of responsibility

The superficial justification for Park Sun-won's amendment to the National Pension Act is to prevent a "Sam-Jeon-Nix selling bomb."

But the essence is deeper. Even though the NPS domestic stock allocation has already been raised to 20.8%, with limits being reached again, the government and ruling party are once again trying to open a path for target adjustments and sales deferrals. The core of this amendment is to institutionalize that path through law and Presidential Decree.

Mitigating market shocks may be necessary. But if stock price defense becomes the objective, the essence of the NPS is shaken. The National Pension Service is not a device for the government's stock market stability; it is a liability reserve for the public's retirement funds.

Rebalancing principles, however inconvenient, are safety devices to prevent the NPS from becoming excessively locked into specific markets and stocks.

If we use the law to defer sales because a limit was reached at 8,500 points on the KOSPI, what will be done at 9,000 points? What will be fixed again at 10,000 points?

If it cannot answer that question, the Park Sun-won Act is not a solution. The expansion of NPS rebalancing is a shifting of responsibility.

It was not retail investors who caused this situation.

It is the Lee Jae-myung administration that brought the NPS in as an ally to boost the KOSPI and packaged stock price gains as a national achievement.

It is difficult to avoid the criticism that the Park Sun-won Act is not a "Sam-Jeon-Nix defense act," but rather legislation that evades responsibility by passing the aftermath onto the National Pension Service, the public, and retail investors.