China plans to roll out private, personal pensions
About time
“ASTONISHING”, “SPECTACULAR”, “unprecedented”: China has won plaudits from the World Bank and other experts for the rapid expansion of its basic state pensions over the past dozen years. The number enrolled in these schemes (including one for urban employees) crossed 1bn in 2021. But the speedy construction of this first “pillar” of China’s pension system has not been matched elsewhere in the planned edifice.
A second pillar is supposed to rest on firms, which can enroll employees in a company pension. But fewer than 29m people, less than 10% of the eligible workforce, had signed up for these “enterprise annuities” by the end of last year. China’s third pillar—personal pensions—is even stumpier. Although individuals in China save a lot, buying homes and other assets, they have little reason (or inclination) to set up personal pensions. To give them a nudge, China’s government launched pilot schemes in Shanghai, Fujian and part of Suzhou back in 2018. These schemes offered modest tax breaks to people willing to lock up their money in pension products offered by approved financial institutions. But take-up was disappointing and the third pillar has made little progress since.
This article appeared in the China section of the print edition under the headline "Pillar talk"
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