South Korea plans to introduce special high-interest rate savings account for troops so they can receive a small lump sum of money when they are discharged from service to the country, the government said Tuesday.
The finance and defense ministries, along with the Financial Services Commission, said the accounts will effectively have annual interest rates of around 7 percent, which is significantly higher than the average most people get if they put their money in a bank. Of the total interest to be given, some 1 percentage point is expected to come from state coffers, with meaningful tax breaks also being provided.
The new account to be opened in July aims to allow each soldier to deposit upwards of 200,000 won (US$184) of their salary per month, with an additional 200,000 won worth of private funds also being allowed, into the savings account.
As of this year, a private earns 300,000 won per month, while a sergeant receives 400,000 won. The total will rise to 410,000 won and 540,000 won in 2020.
“If a soldier puts in 400,000 each month during his roughly two years mandatory service, the person can expect to take out upwards of 8.9 million won when he completes his duties," a government official said.
He said each soldier can open the special account at the country's 14 commercial banks, including KB Kookmin Bank, Shinhan Bank, Woori Bank and KEB Hana Bank, as well as the country's agricultural cooperative Nonghyup.
All able-bodied South Korean men must serve in the country's armed forces to guard against possible conflict with external threats for around two years. Asia's fourth-largest economy has well over half a million men in its military.