China's national pension fund records 7pc return in 2012

Safety net for the aged sees best performance in three years with income of 64.5 billion yuan

PUBLISHED : Wednesday, 03 April, 2013, 12:00am
UPDATED : Wednesday, 03 April, 2013, 5:22am

The national pension fund reported a 7 per cent investment return in 2012, its best performance in three years.

The National Council for Social Security Fund (NSSF) said investment income amounted to 64.5 billion yuan (HK$81 billion) last year, with assets topping 1 trillion yuan for the first time.

The NSSF, a reserve fund used to supplement local pension pools, received a capital injection of 52.6 billion yuan from the central government last year and took over the management of a pension fund in Guangdong province worth 100 billion yuan.

The NSSF's assets totalled 1.108 trillion yuan at the end of last year. The 7 per cent return beat its lacklustre performance of 0.84 per cent in 2011 and 4.22 per cent in 2010.

The mainland's yuan-denominated A-share market dropped 14.3 per cent in 2010 and 21.7 per cent in 2011. The key indicator rebounded 3.2 per cent last year.

The Exchange Fund in Hong Kong raked in HK$108.6 billion in investment income last year, its second-best annual performance on record.

It did not break down its gains by asset class to reveal the characteristics of its performance.

"The NSSF has proved itself to be a professional asset manager by focusing on stability and risk-control," said Z-Ben Advisers chief researcher Howhow Zhang.

"More capital from locally managed pension funds is expected to be handed to the national pension fund in the near future to seek sustainable returns."

Provincial governments are in charge of paying pensions in their own regions, while the NSSF is responsible for subsidising the local funds.

The NSSF said it would continue to upgrade the system that facilitates its management of local pension funds. The country is facing a growing shortfall in pension funds as the population ages. Bank of China International chief economist Cao Yuanzheng predicts the pension financing gap in China may swell to 68.2 trillion yuan by 2033, from about 16.5 trillion yuan in 2010.

Under the national pension system, government subsidies and contributions from state-owned companies are the major contributors to the fund.

To bolster the nation's underfunded social security system, Beijing requires state-owned companies that listed on the stock market after 2005 to transfer 10 per cent of the shares floated to the pension fund.

Economists say existing efforts to increase reserve funds are far from enough to fill the pension financing gap.

Last month, central authorities appointed former finance minister Xie Xuren as the head of the NSSF, replacing former central bank governor Dai Xianglong.