JPMorgan, Warburg Pincus, and UBS are among the global asset managers with Chinese operations who are preparing to increase their retirement offerings in light of last week’s official launch of the nation’s private pension system.
As it struggles with a rapidly aging population, China unveiled its first private pension program on Friday in 36 cities, enabling people to create retirement accounts at banks and purchase pension goods including deposits and mutual funds.
The action signaled the official launch 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 participate in the private pension plan, make annual contributions to their individual accounts of up to 12,000 yuan ($1,680), and earn tax advantages.
Global asset managers have increased their presence in China in recent years, including BlackRock and Fidelity. This is partially due to China’s developing private pension system, which is anticipated to grow from $300 billion to over $1.7 trillion by 2025.
In the future, according to Andrew Wang, CEO of UBS SDIC Fund Management, a partnership between UBS and China’s State Development & Investment Corp., “we will further complete our pension product offerings by launching… funds that meet the demand of investors with various age profiles and retirement priorities.”
Among the 129 funds offered by 40 Chinese and Sino-foreign fund companies, UBS SDIC Fund Management currently has one mutual fund that is eligible for the private pension system.
The CEO of JPMorgan and 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.”
According to Wong, one of the company’s top priorities is to introduce “innovative pension product designs” to the market. To that end, his team is combining global expertise with field research to provide retirement solutions with regional characteristics.
Hwabao WP Fund Management, a Warburg Pincus business in China with more than 45,000 workers, has its sights set on retirement investors within Baowu, the fund house’s largest shareholder.
Wu Liang, general manager of the internet finance department of Hwabao WP FM in Shanghai, stated that serving the employees of Baowu will be the company’s initial focus before expanding to include workers from all companies involved in the steel sector.
Local banks are providing incentives to entice investors to open accounts as they look to tap into a new market, while Chinese and international insurers and fund houses have been developing and promoting products for the local pension market.
Howhow Zhang, Greater China wealth and asset management strategy and transactions leader at EY consult, stated that “the first movers in China’s pension market enjoy an edge.”
Zhang stated that “education efforts will rest on the shoulders of asset managers and distributors,” adding, “I think Chinese retail investors have a learning curve to climb.”
