As the nation formally revealed a private pension system last week, Chinese subsidiaries of global asset managers JPMorgan (JPM.N), Warburg Pincus (WP.UL), and UBS (UBSG.S) are preparing to extend their retirement services.
As it struggles with a steadily ageing population, China unveiled its first private pension programme on Friday in 36 cities, enabling people to create retiree accounts at banks and purchase pension goods including deposits and mutual funds.
The action signalled the formal start of China’s version of the private pension system known as an IRA, or Individual Retirement Account in the United States, which provides tax benefits to people who are saving for retirement.
The new approach allows local domestic workers who are insured by China’s state pension insurance to enroll in the private pension plan, make annual contributions to their personal accounts of up to 12,000 yuan ($1,680), and earn tax advantages.
Global asset managers have increased their position in China in recent years, notably BlackRock (BLK.N) and Fidelity. This is partially due to China’s developing private pension industry, which is predicted to grow from $300 billion to over $1.7 trillion by 2025.
Andrew Wang, CEO of UBS SDIC Fund Management, claimed a partnership between UBS as well as China’s State Development & Investment Corp., there are plans to introduce funds that satisfy the demand of investors with different age profiles and retirement priorities in order to round out the pension product offerings.
Among the 129 funds offered by 40 Chinese plus Sino-foreign fund companies, UBS SDIC Fund Management presently has one mutual fund that is eligible for the privatized pension system.
The CEO of JPMorgan with Shanghai International Trust Co.’s joint venture, China International Fund Management (CIFM), Eddy Wong, stated that the individual pension market in China had “great potential and capacity for growth.”
Wong said one of the company’s top priorities is to introduce “new pension design concepts” to the market. To that end, his team is combining worldwide expertise with field research to provide retirement solutions with regional peculiarities.
Hwabao WP Fund Management (or Hwabao WP FM), a Warburg Pincus business in China with more than 45,000 workers, has its sights set on retirement clients within Baowu, the fund house’s largest shareholder.
According to Wu Liang, the general manager of an internet finance department of Hwabao WP FM in Shanghai, serving the personnel of Baowu would be the beginning point, and there is a reason to increase coverage to include workers of other companies in the steel industry.
Local banks are providing incentives to entice investors to create accounts as they look to tap into a new market, while Chinese and international insurers and investment firms have been designing and pushing products for the domestic pension market.
Howhow Zhang, the Greater China asset and wealth management strategies and transactions head at consultant EY, said the very first movers in China’s pension sector have an advantage.
Zhang speculated that there would be a learning curve for Chinese retail investors and added that both asset managers and suppliers will be responsible for promoting education.
Meanwhile, as China’s suffering under yet another wave of COVID-19 strikes – the only impenetrable defence these markets have is to rely on fast-moving goods.
There had been hoping recently, as major Chines companies struck beneficial deals that stabilised their contribution to the economy; regardless, the ever-evident risk of another economy shutdown is always knocking on the doors of retail investors and shareholders dependent on goods that are sensitive to the slightest change in the markets.
