In April 2022, the State Council issued a guideline on promoting the development of the private pension system, which is recognized as an important supplement to the country’s existing pension system.
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According to the directive, residents covered by the state pension system can open a personal account on an online platform created and managed by the Ministry of Human Resources and Social Security. People can then open an individual financial account with an authorized commercial bank on the platform to manage the pension payment.
The guideline states that people are allowed to deposit up to 12,000 yuan ($1,870) per year into the individual account, while the funds can be used to purchase financial products that offer long-term stable returns but risks. lower. Profits or losses will be borne by the people themselves.
The new private pension scheme is being rolled out in part to address an urgent need for pension reform as the country faces massive demographic change stemming from a plummeting birth rate and an aging population rapidly.
The aging of the population is entering an accelerated phase
According to the data of the seventh census of 2021, in 2020, China’s population aged 60 and over is 264.02 million, or 18.70% (of which the population aged 65 and over is 190.64 million, i.e. 13.50%). Compared to 2010, the proportion of people aged 60 and over has increased by 5.44 percentage points.
China recorded the lowest natural population growth rate on record in 2021, at just 0.34 per thousand, down 1.11 percentage points from a year earlier. Dependency ratios also increase rapidly as the population ages. The proportion of people over 65 has increased from 9.1% of the population in 2011 to 14.2% in 2021, which means that the working-age population is shrinking rapidly.
A huge growing market
With the worsening of aging in China, the number of people participating in Chinese mixed insurance has increased year by year, which ensures the basic life of the elderly population. By the end of 2021, 480.75 million people had participated in China’s basic urban worker insurance, an increase of 24.37 million or 5.34 percent from the previous year.
By the end of 2021, China’s urban employee basic endowment insurance fund revenue had reached RMB 6,004.04 billion, a peak of RMB 1,606.86 billion or 36.54% from compared to the previous year. The basic endowment insurance fund expenditure for urban employees in China was RMB 5,650.03 billion, a year-on-year increase of RMB 531.13 billion or 10, 38%.
Income from the basic endowment insurance fund for urban and rural residents in China jumped 43.7 billion RMB or 9.16 percent to 520.72 billion RMB. By the end of 2021, the basic endowment insurance fund expenditure for urban and rural residents in China had increased by RMB 35.05 billion or 10.39% year-on-year to reach RMB 372.45 billion. .
Given the real and somewhat urgent need for private pensions in China, the market is ripe for growth and innovation. Pioneers with experience in providing products and services for pension funds are particularly well placed to benefit from the opening of this market.
At the same time, good policy guidelines and guidance will be needed to ensure active public participation in the program. Policies such as tax incentives and education campaigns will be important in encouraging the use of private pensions.
Opportunities in the Chinese pension market
Financial firms have been eagerly awaiting the announcement of private pension funds in China for many years. Now that this has happened, and once the criteria for market participation have been clarified, financial companies have everything to gain. Foreign financial asset firms with decades of pension fund experience can also enjoy a competitive advantage over domestic players who are relatively new to the field.
The Ministry of Human Resources and Social Security released the “National Enterprise Annuity Fund Business Data Summary 2021”, which showed that in 2021, the total scale of enterprise annuity accumulation funds nationwide enterprise was 2.6 trillion yuan, up 390.96 billion yuan or 17.38% from 2.2 trillion yuan at the end of 2020. At the end of 2021, the number of enterprises participating in nationwide reached 117,500 and the number of participating employees reached 28.7524 million, up 11.69% and 5.8% respectively year-on-year.
Compared with 2020, actual operating assets of enterprise annuity hit a record high of 2.6 trillion yuan. However, judging from the overall performance, the return on investment of enterprise annuity in 2021 was 124.2 billion yuan, and the weighted average rate of return for the whole year was 5, 33%, which has decreased by more than 10.30% compared to 2020.
We would closely monitor announcements from relevant regulatory departments, including the CBIRC, CSRC, MOF and MOHRSS, which should provide further clarity and guidance on permitted and encouraged activities in the industry.
The China Elderly Care Industry Report 2022-2027 highlights the following?
Political assistance, old age security, medical security and financial guarantee;
China elderly care market, market supply, foreign elderly care industry development status and trends
China’s senior real estate industry, competitive landscape, profit models and investment risk
26 related companies, including: Yihua Healthcare, Huatian Hotel Group, Guangdong Shirong Zhaoye, Shanghai Yanhua Smartech Group, Shanghai Aiyide Medical-Nursing Investment Group, Guangzhou Cixin Nursing, Fuzhou Anxinyuan, Shanghai Harmonious Eldercare Group, etc.
Read the full report: https://www.reportlinker.com/p06275995/?utm_source=GNW
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