Chinese regulators, following years of fledgling pilot programs, have put efforts to build a "third pillar" framework for individual retirement accounts into high gear over the past week.
On Nov. 25, Beijing announced it would extend a system of voluntary personal pension accounts, road tested in a handful of big cities over the past three or four years, to 36 major metropolitan areas.
Under the program's updated rules, Chinese citizens will be able to open personal pension accounts at commercial banks — with 23 in the first batch approved to start personal pension businesses — and "purchase relevant financial products according to their wishes," China's Ministry of Human Resources and Social Security announced.
On Thursday, the China Banking and Insurance Regulatory Commission followed up with an announcement of the launch, effective Jan. 1, of a commercial pension business framework for pension insurance companies — a one-year "pilot program" to be conducted in 10 cities and provinces, including Beijing, Shanghai and Jiangsu.
Technically, the bank-centered private pension initiative is still a pilot but "much more of a fully fledged pilot than it was two or three years ago," covering roughly 300 million of China's 1.4 billion population, said Harry Handley, senior associate, data analytics with Z-Ben Advisors, a Shanghai-based financial sector consulting firm.
Mr. Handley said the system would effectively be open architecture, with providers of products that meet specified eligibility criteria such as minimum assets under management able to offer them to private pension savers through those banking platforms.
While the need to educate the public about the benefits of personal retirement savings will be substantial, Mr. Handley said Z-Ben expects the new program to be a source of strong growth for the industry. Assets under management in third pillar products should surge to $972 billion by 2030 from perhaps $20 billion at present, he said.