What’s new: A pilot program to grow the individual private pensions market, which was rolled out last year in two provincial-level regions, will be expanded to the whole country starting March 1, and will allow pension insurance companies to participate for the first time, the China Banking and Insurance Regulatory Commission (CBIRC) announced.
The “special commercial pension insurance” program started in East China’s Zhejiang province and the southwestern municipality of Chongqing on June 1, 2021. It allows individuals to set up their own private pension accounts with insurers, who invest the funds on their behalf. They can start taking money out after they turn 60.
Originally six major insurance companies were allowed to offer such pension products, including China Life Insurance Co. Ltd. (601628.SH) and PICC Life Insurance Co. Ltd. Under the expansion, 10 pension insurance companies, including state-owned National Pension Insurance Co. Ltd. that is being set up by 17 companies, will be allowed to participate.
The background: The pilot program was set up to bolster the “third pillar” of the country’s pensions system — private pension funds — amid concerns about the sustainability of the “first pillar,” the state-run basic pension. China has been working to overhaul the system as the rapidly aging population and a shrinking workforce squeeze the first pillar’s financial resources. The “second pillar” consists of annuities of private and public employers.
The aim of the pilot is to encourage the self-employed and those without full-time jobs, such as gig workers and those in rapidly growing services sectors such as delivery, to save for their retirement. Products under the pilot should be easy to purchase, provide flexibility in terms of contributions, and offer a stable return.
By the end of January, the six insurers in the pilot program had underwritten nearly 50,000 policies with total contributions of 400 million yuan ($63 million), according to CBIRC data. Nearly 10,000 “new industry employees” such as delivery workers and ride-hailing service drivers were covered.
Contact reporter Zhang Yukun (yukunzhang@caixin.com) and editor Nerys Avery (nerysavery@caixin.com)
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