China faces US$540 billion pensions shortfall and must do more to educate population about retirement, say experts
- Growing economic burden underlines necessity of individual, voluntary contributions
- According to the UN, 35 per cent of China’s population will be aged over 60 by 2050
China must do more to address a severe shortfall in pensions that could, by one estimation, amount to US$540 billion by next year, according to experts.
“The government is not doing nearly enough,” said Stuart Leckie, chairman of Stirling Finance, a consulting firm for pension funds and asset managers in Hong Kong and mainland China. “They need to sort out communications, transparency, open up to the whole country. It is very serious.”
China operates a three-pillar pensions saving system: contributions from government taxation, as well as voluntary contributions by employers and individuals through pension fund of funds, which began in May 2018. A funds of funds is when someone holds a portfolio of other investment funds, rather than directly investing in securities.
A growing economic burden is underlining the necessity of individual, voluntary contributions, which are an area of key focus for Beijing. The introduction of pension fund of funds last year was complete with tax incentives, which are expected to be extended this May.
“Just having tax incentives is not enough,” said Calvin Chiu, senior managing director and head of Asia retirement for multinational insurance company Manulife. “Education for the population around retirement and engagement is very important.”
