City government moves 2.3b yuan annuity assets to the two firms in the wake of Shanghai scandal Shenzhen's city government, the first local authority to have a single body manage enterprise annuities, will transfer the agency's 2.3 billion yuan of assets to Ping An Insurance (Group) and China Merchants Bank to meet new requirements after the recent Shanghai pension fund scandal. Shenzhen Occupational Pension Fund Centre, set up in 2002 as the first government agency to manage enterprise annuities, will make the transfer from this month. The assets consist of more than 850 company accounts covering 64,000 personal accounts. Ping An would act as the trustee and investment agency while Merchants Bank would be the custodian bank and account manager, the centre said on its website. The move is in response to a central government demand that local agencies transfer enterprise annuities - pension funds set up by companies voluntarily to give staff extra retirement benefits - to qualified financial organisations this year. The Ministry of Labour and Social Security, the pension fund watchdog, urged agencies held by local governments to transfer managed assets to financial organisations after the agency managing Shanghai's enterprise annuity was found to have misused funds. Officials at the Shanghai agency, which manages more than 11 billion yuan of the city's enterprise annuities, were found to have committed irregularities including lending funds to a private firm. The scandal has caused the downfall of several senior officials, including former party secretary Chen Liangyu. 'The transfer will increase transparency as well as bring in bigger management space and professional services,' the Shenzhen government statement said. The assets would be transferred wholly to Ping An and Merchants Bank during the grace period to the end of this year. Enterprises in the future could freely choose other companies to manage their pension funds, the statement said. China's enterprise annuity market, still in a nascent stage, will develop quickly with annual assets of more than 100 billion yuan. Fund and asset management companies as well as insurers all expect a big return from the business. In August 2005, the government made 37 financial institutions including banks, insurers, fund management companies, brokerages and trust firms eligible to conduct enterprise annuity business. Foreign players expect a bigger market share of the sector than they secured in the traditional pension fund business, Bartholomew Ng, the country manager in China of ING Insurance Asia-Pacific, has said. A lack of tax incentives is the biggest obstacle to the development of the market, as China does not yet have a full and clear national tax policy to aid the development of enterprise annuities, KPMG and Reuters reported last year.