China has said it will launch an official private pension scheme that aims to push more of the country’s vast household savings into the financial market, as the government grapples with an ageing population.
Employees in China will be able to contribute up to Rmb12,000 a year to private schemes, which the government said would be adjusted in line with “economic development” and would benefit from preferential tax treatment.
The plan, which will be trialled in certain cities for a year before being more widely implemented, is a significant moment in the government’s longstanding efforts to develop its pension system, which relies heavily on state plans and those organised by employers.
”The measures are targeted at Chinese citizen middle-class employees who are already contributors to the basic pooled pension insurance scheme, who will be newly tax-incentivised to contribute annually into an individual pension account,” said Lauren Johnston, visiting senior lecturer, with the School of Economics and Public Policy at the University of Adelaide.
”Their funds in turn will help to seed a growing Chinese wealth management and finance industry.”
The development comes as the share of China’s population aged 65 and over has been forecast to increase more rapidly than in other OECD countries, more than doubling from 10.6 per cent in 2017 to 26.3 per cent in 2050. The share of the Chinese population aged 80 and above will rise even more quickly, according to OECD estimates, increasing more than four times from 1.8 per cent in 2017 to 8.1 per cent in 2050.
China’s approach will aim to move pension savings more directly into the country’s financial markets, as part of a wider opening up that has attracted some of the world’s biggest investors to expand their presence in the country.
