Personal Pension Expansion Sparks Three Big Speculations
Securities Daily reporter Yang Qingwan
After a two-year trial period, the personal pension system is set to expand nationwide. Starting December 15th, the system will be rolled out across all cities, and new investment products such as bonds, retirement savings, and index funds will be added. What changes can we expect after full implementation? How much room for growth is there?
By learning from developed countries' experiences, China's personal pension system has a long way to go in terms of asset preservation and appreciation, as well as stable returns. The key factors that will improve these indicators include the investment product pool, management capabilities, account coverage rate, and contribution scale.
One is that the value-preserving and appreciating capacity of personal pensions is expected to improve. This is not only influenced by the investment product pool but also by management capabilities, so choosing the right assets is crucial.
Bonds are more suitable for long-term investments due to their long-term nature, while index funds have lower fees, diversified risks, and transparent operations, especially wide-based and dividend index funds that reflect compounding values. International precedents show that passive index funds account for nearly half of the total assets in US pension systems. This expansion will help increase personal pension investment options.
Two is that nationwide implementation without restrictions on trial cities, with a broader coverage rate and increased account openings. Public data shows that by the end of this year's first half, over 60 million people have opened personal pension accounts. Although progress has been made during the trial period, the coverage rate still has significant room for improvement compared to China's large-scale participation in basic pensions.
Three is that the contribution scale may increase, and the upper limit may be adjusted in a timely manner. According to data from the Ministry of Human Resources and Social Security, people aged 31-40 with medium to high incomes are the main force behind personal pension account openings, payments, and product purchases. Their main motivations are "preparing for retirement" and "tax benefits".
Prior to this, individual pension accounts had not reached the upper limit, nor had Beijing and Shanghai households reached 3,000 yuan in annual contributions. There is a significant gap between the actual contributions and the upper limit. If people are willing to prepare for retirement, then sacrificing liquidity becomes even more important; if we consider tax benefits from a revenue perspective, the tax benefits of up to 12,000 yuan per year will only be attractive to taxpayers with certain income levels.
According to data from the State Taxation Administration, China has approximately 70 million taxpayers who pay individual taxes, of which more than 60% are eligible for a 3% minimum tax rate, consistent with the personal pension withdrawal tax rate. However, as economic levels develop, the number of people subject to higher tax rates will also increase.
Currently, effective ways to increase contribution scales include increasing account openings and improving average annual contributions. From trial periods to nationwide implementation, account openings will expand, but it may still be necessary to adjust upper limits and enhance tax benefits to achieve this goal.