China’s third pension pillar program, which allows participants to open personal pension accounts, will be expanded nationwide after a two-year pilot, the Ministry of Human Resources and Social Security said in a statement released Dec. 12.
From Dec. 15 onward, Chinese residents with public pension insurance coverage across the country can open individual private pension accounts and qualify for tax incentives, the statement said.
The pilot program was launched in November 2022 across 36 cities and regions. Participants can invest 12,000 yuan ($1,650) to their retirement plans annually and income earned from the investments are not taxed.
Even though 70 million private pension accounts have been opened so far under the pilot program, the average balance was around 2,000 yuan as of Dec. 31.
Overseas fund managers, such as Principal Financial Group, which has $741 billion in assets under management; Manulife Investment Management, which has $807 billion in AUM; and Fidelity International, with AUM of $862 billion, have entered the private pension market, creating joint ventures with local fund managers to offer fund products.
However, analysts have said that the program requires more attractive tax benefits, investor education and diversity of products to improve participation rates.
The statement said more investment products that include index funds and specific retirement products will be made available under the program, and that financial institutions will be encouraged to develop products that meet long-term pension needs, for instance medium-low volatility or absolute return strategies.
Financial institutions are also encouraged to explore the development of default investment products while strengthening the protection of participants and ensuring their right to comprehend and choose products independently, the statement said.