China has rolled out a voluntary personal pension program nationwide to help employees guard against the challenges of keeping social security pension benefits fully funded for an aging population.
Employer Action Code: Act
In 2022, China's central government piloted new tax incentives in 36 cities and regions to encourage employees to make voluntary contributions to individual retirement accounts to complement social security pension benefits and help address the challenges of a rapidly aging population. After a successful pilot, the system is now fully implemented nationwide as of December 15, 2024.
Key details
The following changes to the individual accounts under the pilot program have been made:
- Money may be withdrawn in the event of serious illness or unemployment or in receipt of minimum social security benefits (previously only at retirement, in the event of permanent disability or death, or on permanent emigration from China). Members can receive their benefits monthly, as a lump sum payment or as installments.
- In addition to the existing low-risk financial products approved for individual investors (including bank wealth management products, savings deposits, commercial pension insurance and mutual funds), government bonds, specific pension savings and index funds provided by approved financial institutions are also included in the scope of personal pension products.
Tax incentives under the system remain the same:
- Annual tax deduction of up to 12,000 Chinese yuan for taxpayers
- Tax-exempt investment returns during the accrual phase
- Benefit payments taxed at 3.0% on receipt
Employer implications
According to the Ministry of Human Resources and Social Security, 72.8 million people in the 36 cities had opened individual retirement accounts as of November 2024. Though employers do not have a financial or administrative role in the system, the nationwide availability of the program to employees could affect employers' future thinking on providing retirement benefits. Interest in supplemental retirement plans has been growing, if modestly, among the companies surveyed by WTW. As of January 2025, 22% provide such plans (the majority being enterprise annuity plans).
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