Private products to focus on judicious investments boasting healthy returns

China has almost completed all preparations for a private pension program and will soon start implementing the project, said an official at the Annual Conference of Financial Street Forum 2022 in Beijing on Wednesday.

The country has rolled out supportive policies such as implementation measures, tax policies and rules for financial products in this regard after the General Office of the State Council issued its opinions on promoting the development of private pensions in April.

System docking tests on the private pension information management platform have been progressing smoothly. The platform is almost capable of going live. The first batch of financial institutions that will participate in the private pension program have been decided, and they will launch private pension products one after another, said Li Zhong, vice-minister of human resources and social security.

Under China's private pension program, people covered by basic pension insurance for urban employees or by basic pension insurance for urban and rural residents can contribute up to 12,000 yuan ($1,678) per year to their individual retirement accounts, which can enjoy tax benefits.

Funds held in the accounts will be invested in certain financial products that meet regulatory requirements, including commercial banks' wealth management products, deposits, commercial pension insurance and public funds.

The implementation of the program involves the government, multiple financial regulators and financial institutions. All parties concerned should keep strengthening work coordination and improve their overall planning ability. They will make all-out efforts to do a good job of implementing the program, Li said.

The China Banking and Insurance Regulatory Commission announced on Tuesday it had issued a notice, allowing qualified insurance companies that have strong capital strength and conduct business activities according to regulations to offer individual retirement products to meet the needs of a rapidly aging population.

The move will see insurers joining qualified banks, wealth management companies and mutual fund managers to offer private pension products to individuals.

All these market players should work together to provide financial products that are easy to understand and operate and generate steady returns on investment, said Ye Haisheng, chairman of Guomin Pension & Insurance Co, the Beijing-based national pension insurer.

To expand the coverage of the private pension program, the third pillar of China's retirement safety net, the government should adopt preferential policies, including tax incentives, relending facilities and regulatory incentives, Ye said.

Improving investment returns is the key to development of the private pension market whose long-term growth depends on the design of products, said Zheng Bingwen, director of the Center for International Social Security Studies at the Chinese Academy of Social Sciences.