China launches private pension scheme

Workers can contribute up to 12,000 yuan (US$1,845) per year to their pension fund under the new scheme, which will be rolled out with one-year trials in some cities before being implemented nationwide, the government said on its website.

Previously, both employees and employers can contribute only fixed amounts under state pension plans.

The significant move marks the official launch of China’s private pension sector after almost four years of pilots, and is expected to spur foreign insurers and asset managers to accelerate their expansion into the world’s most populous nation.

The scheme is aimed at tackling economic challenges linked to an ageing population. In 20 years, 28% of China’s population will be more than 60 years old, up from 10% today, making it one of the most rapidly-ageing populations in the world, according to the World Health Organisation.

To encourage participation, the contributions – whose maximum value the government will adjust as economic conditions dictate – will be eligible for tax breaks, while the securities regulator said it would quickly formulate rules to facilitate pension investment by mutual funds.

READ: China launches campaign to limit overtime work

Pension money “can provide more long-term, and stable funds to develop the real economy, via capital markets,” the China Securities Regulatory Commission (CSRC) said in a statement on its website, according to Reuters.