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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 with one-year trials in some cities before being implemented
nationwide, the government said in a policy document on its
website.
Until now, both employees and employers have contributed fixed
amounts under state pension plans.
The milestone marks the official launch of China's private
pension sector after almost four years of pilots, and is
expected to spur foreign insurers and asset managers to
accelerate their expansion into the world's most populous
nation.
"In the mid to long term, the new policy will benefit the
retirement market by helping to accumulate more retirement
income, increasing residents' retirement savings as well as
investing awareness," said Leo Shen, Shanghai-based China head
of fund management business at Allianz Global Investors.
In 20 years, 28% of China's population will be more than 60
years old, up from 10% today, making it one of the most
rapidly-ageing populations in the world, 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 to persuade
individuals to invest part of their earnings in the scheme. In
2021, average per capita disposable income nationwide stood at
35,128 yuan.
To encourage participation, the contributions - whose maximum
value 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 facilitate
pension investment by mutual funds.
Pension money "can provide more long-term, and stable funds to
develop the real economy, via capital markets," the China
Securities Regulatory Commission (CSRC) said in a statement on
its website.
Funds held in the accounts can be invested in certain financial
products, like banking wealth management products, deposits and
public funds, and investors are to 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, the assets their account can
be bequeathed.
Independent consultancies estimate China's private pension
market will grow to at least $1.7 trillion by 2025, from $300
billion currently.
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.
($1 = 6.4396 yuan)
(Reporting by Liangping Gao and Ryan Woo; Additional reporting
by Samuel Shen in Shanghai and Selena Li in Hong Kong; Editing
by Simon Cameron-Moore and John Stonestreet)
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