China’s private pension plan aims to cover every nook and granny as demographic crisis takes hold
- With its population ageing rapidly, China aims to boost its pension-fund market by offering new financial products, but drumming up interest is a challenge
- And those who do participate – often after being given the hard sell by bankers with quotas to fill – tend to contribute just a fraction of the maximum amount allowed
It can be a tall order for a bank clerk – convincing people on the fly to make long-term financial plans – but Zheng Min has to do it at least twice a day.
But one year into the roll-out of a private pension fund that is being piloted in 36 cities before a national launch, the scheme is falling short of expectations due to low participation among the working-class public and poorly performing financial markets.
And the vast majority of participants have been reluctant or unable to contribute the maximum amount allowed, suggesting that those who are convinced to sign up are doing so with caution.
“Each of us is required to identify and persuade two clients to open private pension accounts every day, but it is difficult to achieve,” said Zheng, an account manager at a sub-branch of a state-owned bank in Jiangmen, a third-tier city in southern Guangdong province.
The private pension fund was launched last November to address holes and shortcomings in the current pension system that has become increasingly strained. The new option allows citizens covered by the basic national pension scheme to contribute up to 12,000 yuan (US$1,650) a year toward a retirement account, while deducting any contributions from their annual taxable income.