In April 2022, The State Council 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.
The new private pension scheme is being rolled out in part in response to an urgent need for pension reform as the country faces a massive demographic shift stemming from a plummeting birth rate and a rapidly aging population.
- Yihua Healthcare Co., Ltd.
- Huatian Hotel Group Co., Ltd.
- Guangdong Shirong Zhaoye Co., Ltd.
- Shanghai Yanhua Smartech Group Co., Ltd.
- Shanghai Aiyide Medical-Nursing Investment Group Co., LTD
- Guangzhou Cixin Nursing Home Co., Ltd
- Fuzhou Anxinyuan Investment Consulting Co., Ltd.
- Hunan Kang Le Nian Hua Aged Care Industry Group Co., Ltd.
- Shanghai Harmonious Eldercare Group
- Chongqing Nan'an District Love Nursing Home
- China Vanke
- Poly Real Estate
- Beijing Capital Land
- Taikang Insurance Group
- New China Life
- Ping An Insurance
- Union Life
- Everbright Huichen
- Tianjin Hetong Senior Citizens' Welfare Association
- Zhejiang Double Arrow Rubber
- Hebei Sanhe Yanda Industrial Group
- China Taiping
- Jinling Hotel Nanjing
- WuXi LangGao Elderly Service Group
- Beijing Health (Holdings) Limited
Population Aging Enters the Accelerated Phase
According to the data of the seventh census in 2021, as of 2020, China's population aged 60 and above is 264.02 million, accounting for 18.70% (of which, the population aged 65 and above is 190.64 million, accounting for 13.50%). Compared with 2010, the proportion of people aged 60 and above increased by 5.44 percentage points.
China recorded the lowest ever natural population growth rate in 2021 at just 0.34 per one thousand, down 1.11 percentage points from the prior year. Dependency ratios are also rapidly increasing as the population ages. The proportion of over-65s has grown from 9.1 percent of the population in 2011 to 14.2 percent in 2021, which means the working-age population is shrinking rapidly.
A huge growth market
With the aggravation of the aging in China, the number of people participating in China's endowment 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 the basic endowment insurance for urban workers in China, an increase of 24.37 million or 5.34% over the previous year.
By the end of 2021, the revenue of the basic endowment insurance fund for urban employees in China had hit RMB6,004.04 billion, a spike of RMB1,606.86 billion or 36.54% over the previous year. The expenditure of the basic endowment insurance fund for urban employees in China had been RMB5,650.03 billion, a year-on-year increase of RMB531.13 billion or 10.38%.
The revenue of the basic endowment insurance fund for urban and rural residents in China had jumped RMB43.7 billion or 9.16% to RMB520.72 billion. By the end of 2021, the expenditure of the basic endowment insurance fund for urban and rural residents in China had ascended RMB35.05 billion or 10.39% year-on-year to RMB372.45 billion.
Given, the genuine and somewhat urgent need for private pensions in China, the market is ripe for growth and innovation. Early movers with experience in providing products and services for pension funds are particularly well-positioned to gain from the opening of this market.
Opportunities in the China pension market
Financial companies have been eagerly anticipating the announcement of private pension funds in China for many years. Now that it has come, and once the criteria for participation in the market have been clarified, financial companies stand to profit greatly. Foreign financial asset companies with decades of experience in pension funds may also enjoy a competitive advantage over domestic players who are relatively new to the field.
The Ministry of Human Resources and Social Security released `2021 National Enterprise Annuity Fund Business Data Summary`, which showed that in 2021, the total scale of enterprise annuity accumulation funds nationwide was 2.6 trillion yuan, up 390.96 billion yuan or 17.38% from 2.2 trillion yuan at the end of 2020. By the end of 2021, the number of participating enterprises nationwide reached 117,500 and the number of participating employees reached 28.7524 million, up 11.69% and 5.8% respectively year over year.
Key Topics Covered:
2 China Old-age Security System
3 China Aged Care Market
4 China Old-age Real Estate Industry
5 Key Enterprises in China Aged Care Industry
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