Private pension scheme launched to help seniors

A much healthier and more complementary pension system is taking shape in China due to the rolling out of a private pension scheme to better support the aging population.

The State Council on Thursday released a guideline on pushing forward the development of private pension scheme, which is recognized as an important supplement to the nation's existing pension system.

According to the guideline, residents covered by the State pension system can open a personal account at an online platform built and run by the Ministry of Human Resources and Social Security. People can then open an individual financial account at a commercial bank authorized at the platform to manage the pension payment.

The guideline said that people are allowed to deposit up to 12,000 yuan ($1,870) annually to the individual account, while the funds can be used to purchase financial products featuring stable, long-term returns but lower risks. Profits or losses will be borne by the people themselves.

Those who join the private pension scheme will be given tax preferences while the detailed information and policies are not released yet.

The guideline said that people cannot withdraw the money under the private pension scheme. Those who have retired, lost the ability to work or have immigrated from the mainland can draw the money every month or lump sum.

So far, the nation is running a combined pension system, under which the State basic pension system has covered over 1,030 million residents by the end of 2021 and the supplementary one - such as enterprise annuities and commercial insurance support covering over 58 million residents.

Hu Jiye, professor from the Business School of the China University of Political Science and Law, said in a recent interview with the Red Star News that the nation can transform from a saving-based pension system to a investment-driven one by building up the private pension scheme, which is an important supplement to the previous two systems.

He said that people can join the private pension scheme voluntarily. "It's a supplement not a replacement," he said.

The guideline said that rolling out the private pension scheme is an important way of improving the nation's pension system and people's sense of happiness and security, which can also help support the increasing aging population.

Pang Shi, director of the department of employment and entrepreneurship at the Chinese Academy of Personnel Science, said the private pension scheme is a long-term investment tool with a final target of supporting the elderly.

"It features legal tax preference and investment," she added. "It's a new try for individual savings, and will be an important way to preserve the personal wealth after the detailed tax preferences are released. As the financial products are selected and supervised by administrative departments, people can enjoy safer returns."

She added that hedging the pension funds in the long term will be beneficial to the sustainable development of the nation's pension system, and cushioning the impact by aging population.

Latest official figures show that the nation has about 264 million people aged 60 or above, roughly 18.7 percent of the total population. People aged 65 or above are 191 million, accounting for 13.5 percent of the total population.

"The private pension scheme can also improve people's living standard after retirement, easing the public's anxiety and stabilizing the society by reducing the systematic risks under the aging problems," she said.