Retirement planning should be more annuities driven, urges Chinese elderly finance group

Market watchers are pinning their hopes on further incentives to ignite corporate and household retirement planning in mainland China, as the nation seeks more sustainable ways of financing its greying population.

“We need more cuts in corporate contributions to the state pension system and have more employers build up the annuity sector, which is still in its infancy,” said Dong Keyong, secretary general of China Ageing Finance Forum, who added that figures showed less than 7 per cent of employees in China currently run annuity-based saving schemes.

Annuities and pensions are similar in that both are used for retirement purposes.

However, annuities can also be taken out by individuals for a number of different reasons, whereas a pension is provided by an employer solely for the purpose of retirement. They can also provide a guaranteed monthly income in retirement or to a child or spouse.

Some major state-owned enterprises do offer company annuity schemes whereby employers voluntarily pay extra for retirement coverage on top of the mandatory one as a means of attracting employees, leaving many employees at smaller businesses at a disadvantage.