From now on, Chinese employees will be able to invest and supplement funds in their pension accounts, officials said on Thursday, launching the first private pension plan of the country as they face economic challenges related to an aging population.
Employees can contribute up to 12,000 yuan ($1,860) per year to their pension fund under the new scheme, which will be rolled out on a year-long trial in some cities before being rolled out nationwide, the government said in a statement. policy on your website.
Until now, both employees and employers have contributed fixed amounts into state pension plans. The milestone marks the official launch of the private pension scheme in China after nearly four years of pilot testing, and is expected to prompt foreign insurers and asset managers to accelerate their expansion in the world’s most populous nation.
“In the medium and long term, the new policy will benefit the retirement market by helping to accumulate more retirement income, increase residents’ retirement savings and raise investment awareness.”said Leo Shen, head of the Shanghai-based Allianz Global Investors fund management business.
In 20 years, 28% of China’s population will be over 60, up from 10% today, making it one of the world’s fastest-aging populations, according to the World Health Organization.
The scheme “should also benefit China’s onshore capital market by providing an additional source of long-term capital,” Shen told Reuters.
Part of the challenge for policymakers will be persuading people to put some of their profits into the plan. In 2021, the average disposable income per capita across the country was 35,128 yuan.
To encourage participation, contributions – the maximum value of which the government will adjust as economic conditions dictate – will be eligible for tax breaks, while the securities regulator said it would quickly formulate rules to make it easier for mutual funds to invest in pensions. .
Pension money “can provide more long-term and stable funds to develop the real economy, through capital markets,” the China Securities Regulatory Commission (CSRC) said in a statement on its website.
The funds held in the accounts can be invested in certain financial products, such as bank wealth management products, deposits and public funds, and investors must bear the corresponding risks, according to the government document.
Those who will be eligible for the scheme include urban employees who already contribute to their basic pension insurance under the state social security system.
If a private pension holder dies, assets in their account can be bequeathed.
Independent consultancies estimate that China’s private pension market will grow to at least $1.7 trillion by 2025, from $300 billion.
Last July, Allianz received approval to form the first wholly foreign-owned insurance asset management company in China. In November, it bought out its Chinese partner from a life insurance joint venture.
