Annuity system tops US$12 b in 9 months
Chinese enterprises have accumulated more than 100 billion yuan (US$12 billion) in annuities in nine months since the government standardized annuity regulations, according to a Ministry of Labour and Social Security official.
The number is expected to grow, with more and more businesses planning to introduce the annuity system, Rui said at a seminar on social security legal systems sponsored by the Institute of Law under the Chinese Academy of Social Sciences (CASS).
China's pension system is mainly comprised of statutory pensions, annuities or additional corporate pensions, as well as private pension insurance, according to Rui.
The country's first regulations on business annuities became effective in May, laying the legal framework for annuity systems that encourage enterprises and employees to set up annuity funds to complement statutory pension funds.
Enterprises are offered a tax waiver for money collected as annuities, if the amount is not more than 4 per cent of their employees' yearly salaries. The regulations require enterpri-ses to form special offices or hire financial companies to manage the funds.
The Taiping Life Insurance Co Ltd and the Ping An Insurance Co Ltd won approval from the China Insurance Regulatory Commission last month to become the first two insurance companies to run an annuities business.
It is generally believed China's annuities could exceed 1 trillion yuan (US$120 billion) when the market becomes fully developed.
Liu Junhai, a researcher with the CASS Institute of Law, said annuity regulations need to be improved in additional ways to make annuity management more cost-effective.
According to current regulations, a financial company entrusted to manage a business annuity should hire a custodian, a bookkeeper and an asset manager to take care of the respective links in annuity management.
"Such a long management chain is costly and will lower the efficiency of supervision," Liu told China Daily.
"The policy-makers' great caution in making the first-ever annuity regulation is understandable, but efficiency is also a factor that needs to be taken into account."
The Standing Committee of the 10th National People's Congress has planned to produce a social security statute during its tenure.