Retirement savings in China's three-pillar pension system rose an estimated 19% in 2019 to 15.5 trillion renminbi ($2.22 trillion), topping the past decade's 17% long-term average.
KPMG's fourth annual report on China's pension industry cited government capital injections to China's pillar-one public pension fund and the growth of the country's mandatory pillar-two scheme for provincial government employees as factors behind the relatively strong growth.
The report said growth last year for China's pillar-three private pension offerings was "incremental" and called for greater tax incentives to allow them to achieve their "big potential." These vehicles include tax-deferred annuities offered by insurers under a 2018 pilot scheme and target-date fund of funds products offered by fund management companies.
Pillar one, which accounted for about half of the country's retirement assets as of Dec. 31, will remain the backbone of China's retirement system, said Howhow Zhang, a Hong Kong-based partner, global strategy group, with KPMG China, in a news release.
But increasingly, "individual investors must take more responsibility for their financial affairs or risk not having enough resources for their retirement," he said.
The biggest development in 2019 for pillar two, besides growth in assets, "was Chinese policymakers' decision to open up the pension industry sector to foreign players," as part of broader financial industry reforms, said Bonn Liu, a Hong Kong-based partner and head of asset management in the Asia-Pacific region, in the same release. Pillar two includes occupational annuities as well as enterprise annuities for private sector employees.