China will expand its private pension scheme nationwide starting December 15, following a successful pilot launched in 36 cities in November 2022. This initiative aims to address the country’s pension gap, especially as its population ages rapidly. Under the scheme, individuals covered by public pension insurance can open private pension accounts and invest up to 12,000 yuan ($1,652) annually in various financial products, including government bonds, designated pension savings, and broad-based index funds like the CSI300, CSI500, CSI800, ChiNext, and STAR 50 ETFs.
The move is part of efforts to develop the “third pillar” of China’s pension system, which supplements the public safety net and corporate annuities. However, experts note that both corporate and private pension plans are underdeveloped, and the public scheme is facing financial strain. The launch of this scheme, similar to the U.S. Individual Retirement Accounts (IRA), follows the approval of a proposal to raise the country’s retirement age to mitigate the economic pressure from a shrinking workforce. Over 60 million private pension accounts were opened during the pilot phase, showing a strong response to the program.
The news has caused a surge in market indices.
