China announced a private pension scheme on Thursday in the latest move by authorities to address challenges arising from an ageing population.
Employees can contribute up to 12,000 yuan ($1,863) per year to their pension fund under the new scheme, compared with a fixed payment from both employees and employers under the state pension plan.
The scheme would allow employees to save funds in pension accounts and invest in financial products.
That would not be affordable for most people in the labour market. In 2021, per capita disposable income nationwide was 35,128 yuan.
The government will adjust the maximum contribution allowed under the new plan according to economic conditions, it said in a notice that unveiled the new scheme.
Tax deductions would be available on personal pension contributions for the first time.
Funds held in private pension accounts can be invested in certain financial products, like banking wealth management products, deposits and public funds, the notice said.
Independent consultancies estimate the private pension market will grow to at least $1.7 trillion by 2025, from $300 billion currently.
China needs to strengthen diversified pension insurance due to its ageing population, Nie Wen, an economist at Shanghai-based Hwabao Trust, said.
In just 20 years’ time, 28% of China’s population will be more than 60 years old, up from 10% today, making it one of the most rapidly-ageing populations in the world, according to projections cited by the World Health Organization.
- Reuters, with additional editing by George Russell