Source: Caixin News

Recently, the Ministry of Human Resources and Social Security, the Ministry of Finance, the State Taxation Administration, the Financial Regulatory Bureau, and the China Securities Regulatory Commission issued a notice on the comprehensive implementation of the personal pension system.

The notice specifies that starting from December 15, 2024, workers participating in basic Urban Employee Retirement Insurance or basic Rural Resident Retirement Insurance in China can participate in the personal pension system. The implementation scope of tax preferential policies has expanded from 36 pilot cities (regions) to the entire country.

The notice stipulates that based on existing financial products, savings deposits, commercial Retirement Insurance, and publicly offered Fund products, national bonds, specific Retirement savings, and Index Funds will be included in the scope of personal pension products.

The notice from the Ministry of Human Resources and Social Security, the Ministry of Finance, the State Taxation Administration, the Financial Regulatory Bureau, and the China Securities Regulatory Commission on the comprehensive implementation of the personal pension system.

Human Resources and Social Security Departments (Bureaus) of all provinces, autonomous regions, municipalities directly under the central government, and Xinjiang Production and Construction Corps, Finance Departments (Bureaus), as well as provincial, autonomous regional and municipal tax bureaus under the State Taxation Administration, and all financial regulatory bureaus and securities regulatory bureaus:

In accordance with the "Opinions of the General Office of the State Council on Promoting the Development of Personal Pension" (Guo Ban Fa [2022] No. 7), the personal pension system was implemented in advance in 36 cities (regions) in November 2022, and over the past two years, positive results have been achieved with stable overall operation of the system. To deeply implement the spirit of the 20th National Congress of the Communist Party and the second and third plenums of the 20th Central Committee, and to accelerate the development of a multi-level and multi-pillar pension insurance system, with the approval of the State Council, the following notification is issued regarding comprehensive implementation of the personal pension system:

I. Expand the scope of implementation

(1) Implementation Time. From December 15, 2024, workers who participate in the urban employee basic pension insurance or rural resident basic pension insurance within China can participate in the personal pension system.

(2) Participation Method. Participants can open personal pension accounts through the National Social Insurance Public Service Platform, electronic social security cards, the 12333 APP, or open personal pension accounts at qualified commercial Banks. Participants can change the bank of their personal pension fund account twice a year.

(3) Expand the implementation scope of tax preferential policies. The implementation scope of personal pension tax preferential policies will be expanded from the initial cities (regions) to the entire country. Relevant departments should closely cooperate to implement and detail the tax preferential policies and fully leverage the incentive effects of these policies.

II. Optimize product supply

(1) Enrich product varieties. On the basis of existing financial products such as wealth management products, savings, commercial pension insurance, and mutual funds, government bonds will be included in the personal pension product range. Specific pension savings and index funds will be included in the personal pension product catalog to promote more pension financial products into the personal pension product range. Financial Institutions are encouraged to research and develop personal pension savings products and medium-low volatility or absolute return strategy fund products that meet long-term pension needs, and to reasonably determine the term and interest rate of personal pension savings.

(2) Provide investment risk warnings. Financial Institutions should comply with regulations to properly disclose the asset allocation and risk levels of individual pension products. The personal pension information management service platform and the financial industry platform should classify and display personal pension products according to risk levels, enhancing risk warnings.

(3) Explore default investment services. Financial Institutions should legally and properly provide individual pension investment consulting services, recommending suitable individual pension products based on individual investment risk preferences and characteristics such as age. Encourage financial institutions to explore default investment services with the consensus of participants. Strengthen the protection of financial consumers and investors, fully ensuring participants' right to information and autonomy in choices.

3. Improve management service levels.

(1) Improve the conditions for starting individual pension business. Carefully determine the scope of commercial banks that can start individual pension business. Commercial banks should continuously improve their business management systems, establish sound management systems and operating procedures. Encourage and support commercial banks to sell all types of individual pension products and to continuously increase the variety of products sold.

(2) Improve the service level of financial institutions. Commercial banks should strengthen online and offline service channels, providing more Personal Services for participants to change funds account's bank, withdraw individual pensions, etc. Under the premise of legal compliance and manageable risk, commercial banks should enhance cooperation with wealth management companies, insurance companies, fund companies, and fund sales institutions to support their provision of individual pension services. The requirement for 'recording and video recording' should be waived when participants purchase commercial pension insurance products online through personal pension fund accounts in commercial banks.

(3) Strengthen information technology construction. Enhance the construction of the personal pension information management service platform, closely collaborating with tax authorities and all participating financial institutions, relying on electronic social security cards to establish a full-chain service system for individual pensions, continuously improving the convenience of account opening, fund contribution, product trading, benefit recording, individual pension withdrawals, and tax benefits.

4. Enhance the conditions and methods for withdrawal.

(1) Increase withdrawal scenarios. In addition to reaching the age for basic pension withdrawal, completely losing labor ability, or settling abroad, participants diagnosed with major illnesses, having received unemployment insurance benefits under certain conditions, or currently receiving minimum living security benefits can apply for early withdrawal of individual pensions, with specific methods to be established separately. Strengthen the information sharing between the personal pension information management service platform and relevant information platforms to facilitate early withdrawal for qualifying participants.

(2) Diversification of cash-out channels. Participants who meet the requirements for receiving personal Retirement can apply through various social insurance agencies at all levels, the national unified online service portal, and the bank where their personal Retirement fund account is opened. After verification by the social insurance agency, the bank will disburse the personal Retirement to the individual's social security card bank account.

(3) Improvement of cash-out methods. Participants can choose to receive their personal Retirement monthly, in installments, or as a lump sum. If participants wish to change their cash-out method, commercial banks should accept the request.

5. Strengthen comprehensive supervision.

The Ministry of Human Resources and Social Security, the Ministry of Finance, the State Taxation Administration, the Financial Regulatory Administration, the China Securities Regulatory Commission, and other departments should enhance information sharing, effectively strengthen regulation, and promote the standardized operation of the system according to their respective responsibilities. Financial Institutions should adhere to the principle of voluntary participation and carry out personal Retirement business in accordance with the law and regulations. Financial regulatory departments should strictly handle Financial Institutions that engage in personal Retirement business in violation of regulations.

6. Effectively implement organizational work.

Departments including human resources and social security, finance, taxation, and financial regulation should strengthen organizational leadership, improve work mechanisms, enhance policy promotion, and implement various policy measures in detail. At the same time, it is necessary to fully mobilize the enthusiasm of Financial Institutions and business entities to jointly promote the healthy development of the personal Retirement system. Regions with conditions may explore support policies suitable for their area. Any major issues encountered during implementation should be reported promptly.

Ministry of Human Resources and Social Security, Ministry of Finance, State Taxation Administration.

Financial Regulatory Administration, China Securities Regulatory Commission.

December 10, 2024

Editor/Rocky