After two years of successful pilot programs across 36 cities and regions, per 15 December 2024 China has started with the implementation of a personal pension system nationwide, with the aim to accelerate the development of a multi-level and multi-pillar pension insurance system. The initiative marks a significant step toward enhancing financial security for workers and fostering a robust pension framework. This article outlines the key elements of the policy update, its implications for individuals and financial institutions, and the measures being introduced to ensure a seamless rollout.
Nationwide Expansion of the Personal Pension System
Implementation Timeline and Scope
From 15 December 2024, all workers in China participating in either the basic pension insurance for urban employees or the basic pension insurance for urban and rural residents will be eligible to join the personal pension system. This represents a shift from the pilot phase to full national coverage, allowing greater inclusivity and accessibility for the workforce.
How to Participate
Participants can open personal pension accounts through national online service platforms, such as the national social insurance public service platform, electronic social security cards, or the handheld 12333 app. Alternatively, they can initiate the process at qualified commercial banks. Additionally, participants will have the flexibility to change their chosen bank for personal pension fund accounts up to twice a year, ensuring adaptability.
Expanded Tax Incentives
The preferential tax policies, initially available only in pilot cities, will now be implemented nationwide. This expansion aims to provide financial relief and encourage widespread adoption of the system. Government departments are tasked with closely collaborating to ensure the effective execution of these tax benefits and maximize their positive impact.
Enhanced Product Offerings and Investment Management
Broader Product Categories
The personal pension product portfolio is being diversified to include treasury bonds, specific pension savings, and index funds, alongside existing options such as wealth management products, savings deposits, commercial pension insurance, and public funds. Financial institutions are encouraged to design long-term pension savings products and medium-to-low-volatility investment strategies tailored to participants’ needs.
Risk Management and Investor Protection
Financial institutions are required to provide clear risk warnings and accurate information on asset allocation and product risk levels. This information will be displayed on the personal pension information management platform to ensure transparency.
Additionally, institutions are exploring the development of default investment services. These services, contingent on participant consent, will involve recommending suitable products based on factors like age and risk appetite. By prioritizing consumer protection and informed decision-making, these measures aim to safeguard the interests of participants.
Improvements in Management and Service Delivery
Strengthened Business Capabilities of Commercial Banks
Commercial banks offering personal pension services are required to enhance their business management systems, streamline procedures, and expand their product offerings. They are also encouraged to collaborate with wealth management companies, insurance firms, and fund distributors to provide comprehensive personal pension solutions.
To improve participant convenience, banks will enable seamless changes to account-opening institutions and streamline processes for purchasing pension products. Notably, the requirement for “audio and video recording” when purchasing commercial pension insurance online via a bank account will be removed.
Digital Transformation for Seamless Access
The personal pension information management service platform will undergo significant upgrades to enhance efficiency. This includes closer integration with tax departments and financial institutions, leveraging electronic social security cards to create a fully digital service chain for account management, product transactions, tax incentives, and pension collections.
Flexible and Inclusive Pension Collection Options
Expanded Eligibility for Early Withdrawal
Participants facing specific life circumstances will have broader access to personal pensions. In addition to retirement, permanent disability, and emigration, individuals diagnosed with severe illnesses, those meeting unemployment insurance conditions, or those receiving minimum living allowances may now apply for early withdrawals. Further details on these measures will be issued separately.
Simplified Collection Process
Eligible participants can collect their pensions through social insurance agencies, unified online portals, or the bank where their pension fund account is held. The verification process will be managed by social insurance agencies, ensuring accuracy and efficiency.
Customized Payment Methods
Participants will have the flexibility to receive their pensions in monthly installments, periodic payments, or as a lump sum. Changes to payment methods can also be requested, allowing participants to adapt their pension plans to changing financial needs.
Comprehensive Supervision for System Integrity
To ensure the smooth operation of the personal pension system, a multi-departmental supervision mechanism will be implemented. The Ministry of Human Resources and Social Security, Ministry of Finance, State Administration of Taxation, State Administration of Financial Regulation, and the China Securities Regulatory Commission will collaborate to share information and enforce compliance.
Financial institutions must adhere strictly to regulations and ensure that participation in personal pension schemes is entirely voluntary. Institutions found in violation of the rules will face strict penalties, safeguarding the integrity of the system.
Coordinated Implementation and Regional Flexibility
Government departments at all levels are directed to strengthen organizational leadership, refine work mechanisms, and promote awareness of the policy. Financial institutions and businesses will play a pivotal role in driving adoption and ensuring the system’s success.
Regions with the capacity are encouraged to explore region-specific support measures to complement the national framework. Any significant challenges encountered during implementation are to be promptly reported to the central authorities for resolution.
Conclusion: A New Era for Personal Pensions in China
The nationwide rollout of the personal pension system marks a transformative milestone in China’s efforts to establish a multi-pillar pension framework. By expanding accessibility, enhancing product offerings, and streamlining services, the system aims to provide robust financial security for workers while fostering innovation and collaboration within the financial sector.
For businesses, financial institutions, and individuals, the comprehensive measures introduced under this policy offer a range of opportunities and responsibilities. As the system evolves, staying informed and proactive will be key to maximizing its benefits and navigating its complexities.
With its focus on inclusivity, adaptability, and consumer protection, the personal pension system is poised to play a central role in shaping the future of retirement planning in China.