Personal pensions launch a "full-scale war"

Nearly two years after its implementation, the personal pension system has finally ushered in comprehensive promotion.

On December 12, the Ministry of Human Resources and Social Security and four other departments issued the "Notice on the Comprehensive Implementation of the Personal Pension System" (hereinafter referred to as the "Notice"), clarifying that starting from December 15, the personal pension system will expand from 36 pilot cities (regions) to the entire country.

The "Notice" stipulates that based on existing financial products, savings deposits, commercial pension insurance, and public fund products, government bonds, specific pension savings, and index funds will be included in the scope of personal pension products; it will prudently determine the range of commercial banks that can operate personal pension businesses and encourage and support commercial banks to sell all types of personal pension products.

The government work report released at the beginning of the year has already made it clear that the personal pension system will be promoted nationwide.

In November 2022, the Ministry of Human Resources and Social Security, the Ministry of Finance, the State Taxation Administration, the former China Banking and Insurance Regulatory Commission, and the China Securities Regulatory Commission jointly issued the "Implementation Measures for Personal Pensions"; in the same month, personal pensions were piloted in 36 cities (regions).

The Ministry of Human Resources and Social Security disclosed that by the end of the first half of the year, the number of personal pension accounts had exceeded 60 million; although there has been no public data recently, industry insiders revealed that it has surpassed 70 million.

After nationwide promotion, Guotai Junan Securities expects the annual contribution scale of personal pensions to reach 156.3 billion yuan.

The personal pension system is beneficial for supplementing the third pillar of pensions, increasing the supply forms of pension security, and improving the multi-level and multi-pillar pension insurance system;

For banks, insurance, funds, and securities financial institutions, the stable income brought by personal pensions can contribute a continuous increment, and viewing personal pensions as "hook products" can better establish trust with customers and connect more wealth management services.

Therefore, since the day the personal pension system was implemented, the "account opening battle" among major institutions has never ceased.

As the nationwide promotion approaches, first batch pilot institutions such as Bank of China, Postal Savings Bank, Industrial Bank, and Zhejiang Merchants Bank have launched appointment and referral account opening benefits to accelerate the pace of "seizing" the new market.

Account Opening Competition

The first to "get involved" are the banks as account opening platforms.

According to regulations, participants can open personal pension accounts through commercial banks, with an annual contribution limit of 12,000 yuan.

Policy-wise, account funds can enjoy tax benefits, and pension products often have long-term attributes. Coupled with the institutional restriction of "one person, one account," participants are very likely to choose to contribute the maximum amount each year after opening an account, bringing continuous funds to the banks.

If a 30-year-old male plans to retire at 60 and intends to contribute the maximum amount to his pension each year before retirement, the bank could stabilize funds of 360,000 yuan over 30 years.

As the biggest beneficiaries of the account system, the first batch of six state-owned banks, twelve joint-stock banks, and five city commercial banks have already started the "account opening battle."

Insurance broker Li Hua (pseudonym) stated that currently, various major banks have "account opening benefits" corresponding to personal pension products; for just opening an account, China Construction Bank offers 38 yuan, while Industrial Bank and China Everbright Bank offer 50 yuan; depending on the amount deposited later, there will be additional benefits.

Taking China Everbright Bank as an example, Li Hua demonstrated that for new accounts opened in 2024 with the maximum deposit, the benefit cap is 160 yuan; for non-new customers depositing the maximum, it is 110 yuanAs the year-end approaches, the "account opening battle" across various industries is becoming increasingly intense.

Currently, all "Big Six" banks have launched different levels of individual pension account deposit activities. The highest benefit available from Industrial and Commercial Bank of China for "account opening + 12,000 yuan full deposit" has reached 656 yuan;

Joint-stock banks are also taking action, with Industrial Bank announcing that new account holders who deposit any amount can receive a maximum red envelope of 188.88 yuan.

In addition, JD Finance has notified that "opening an account gives gold," with 100mg of gold available for account activation before the end of the year.

From the pilot data, first-tier cities have a higher promotion rate among the 36 pilot cities. By the end of the third quarter, Beijing, Shanghai, and Shenzhen had cumulatively opened 5.318 million, 5 million, and 4.34 million accounts, respectively.

However, the phenomenon of "hot account opening, cold deposits" is widespread.

During the same period, the personal pension deposit amounts in the aforementioned three cities were 11.42 billion yuan, 11 billion yuan, and 4.136 billion yuan, with an average deposit per account of less than 2,500 yuan, still a significant gap from the annual limit of 12,000 yuan.

To address this dilemma, banks generally offer "tiered" benefits to participants, providing subsidies ranging from 1,000 yuan to full deposit benefits.

For example, new users of Agricultural Bank, Industrial Bank, Everbright Bank, and Zhejiang Merchants Bank can receive benefits ranging from 50 to 388 yuan for making full deposits.

"Even if customers do not deposit money, we still hope to open more accounts." Wang Hong (pseudonym), a branch manager of a state-owned bank, stated, "Firstly, the head office has strict targets, and secondly, there may still be long-term fund transfers in the future."

Wang Hong revealed that since the implementation of the system, the company's promotional efforts have not diminished. "I personally believe that young people can be encouraged to save, and for middle-aged and elderly people, buying a stable financial product for 5-10 years is also a good choice."

Tax-saving Expectations Rise

During the pilot process, Wang Hong noted that "we can feel the change in the customer demographic."

"Initially, we would recommend the middle-aged and elderly groups nearing retirement. The liquidity disadvantage of individual pensions is almost non-existent for them, and with the account opening benefits and gifts, the communication difficulty is relatively small." Wang Hong stated, "However, now more young people are realizing that tax-saving is an important advantage of individual pensions."

According to multiple training materials on individual pension products obtained by Xinfeng, various institutions target high-income groups, freelancers, and those nearing retirement as their customer base.

Among them, high-income groups have tax-saving needs, freelancers seek future security, and the middle-aged and elderly are not afraid of liquidity disadvantages.

"In our view, the biggest advantage of individual pensions lies in tax incentives." Li Hua stated, "High-income individuals have a more comprehensive understanding of taxes and know that the tax savings over time can be substantial."

According to the calculations provided, a 30-year-old male with an annual income of over 1.02 million yuan can save 162,000 yuan in taxes by fully contributing to his individual pension before retiring at 60.

Experts have also indicated that with residents' understanding of personal pensions shifting from "products" to "systems," there is still significant room for growth in the number of accounts opened in the future.

"Tax incentives are a great leverage," the expert stated. "When residents realize that personal pensions are a retirement system closely related to themselves, rather than financial products sold by banks or insurance companies, the penetration rate will significantly increase."

From international experience, implementing tax incentives is indeed a common method for developing the third pillar of pensions.

However, due to different tax systems in various countries, the strength and effectiveness of these incentives vary. For example, the matching contribution tax incentives of the U.S. IRA significantly increase national retirement savings, while in Spain, the effect is minimal.

Liu Yi, director of the Service Economy and Internet Development Research Office at the Chinese Academy of Social Sciences' Institute of Finance and Economics Strategy, stated that China's personal pension tax incentives are reflected in two aspects: first, a pre-tax standard deduction of 12,000 yuan for individual income tax, using the Exempt-Exempt-Tax (EET) model; second, a 3% individual income tax rate when withdrawing pension funds.

Liu Yi pointed out that the 3% tax rate when withdrawing personal pensions has limited incentive and appeal.

However, some institutions predict that personal pensions still have enormous potential.

A research report by CICC pointed out in 2021 that, referencing the asset scale of the U.S. third pillar IRAs in DC-type private pensions, there is a potential increase of 29 trillion yuan in China's third pillar assets under neutral conditions.

According to calculations by Guojin Securities in December, after the nationwide promotion of personal pensions, the annual contribution scale is expected to reach 156.3 billion yuan.

The vast "blue ocean" accompanied by the expectation of nationwide promotion has led several banks to start "rushing" into the new market.

For example, banks such as Bank of China and Zheshang Bank have launched "appointment account opening" benefits, while Industrial Bank announced that appointments in non-pilot cities could draw a maximum red envelope of 168.08 yuan; Zheshang Bank and Postal Savings Bank stated that if a referral for account opening is successful, they can also participate in a lottery.

Diversified Expansion Imminent

While banks are competing for account opening benefits, insurance and public fund institutions are also competing for products.

Since the pilot program began, the "product shelf" for personal pensions has continued to expand, growing from nearly 150 initial products to over 800.

As of December 11, the National Social Insurance Public Service Platform disclosed that there are currently 26 personal pension financial products, 466 savings products, 165 insurance products, and 200 fund products.

Taking insurance products as an example.

At the beginning of the pilot, the first batch of entrants included only 6 companies, such as China Life, PICC Life, and National Pension, offering 7 products. As of December 11, this has expanded to 27 companies offering 220 types of products, as disclosed by the banking and insurance regulatory authority.

The categories have also expanded from the exclusive commercial pension insurance in the first phase to include whole life, annuity, and universal life products.

According to past records, the aforementioned products generally have stable returns.

For example, in 2022, the 7 exclusive commercial pension insurance products had a stable account settlement yield of 4-5.15% and a growth account yield of 5-5.7%; in 2023, 15 products had stable accounts yielding 2.1-4.15% and growth accounts yielding 3-4.25%.

In addition, previously innovative products are expected to be included in the personal pension catalog.

For example, the tax-deferred pension insurance that was piloted in Shanghai, Fujian, and Suzhou Industrial Park after 2018In mid-2023, regulators issued the "Notice on Matters Related to the Pilot of Individual Tax-Deferred Commercial Pension Insurance and the Connection with Individual Pension Plans (Draft for Comments)," which stipulates the integration of tax-deferred pension insurance into the individual pension system.

From the perspective of information disclosure, the infrastructure construction of insurance products still has shortcomings.

As of December 11, the official website of the China Banking and Insurance Regulatory Commission shows a total of 220 individual pension insurance products, with 61 products currently on sale, while the National Social Insurance Public Service Platform shows 165 insurance products, and the two have not yet achieved synchronization.

In terms of funds, broad-based index funds and ETF linked funds such as the CSI 300 Index, CSI 500 Index, CSI A500 Index, and ChiNext Index are expected to include and increase Y shares to meet investors' allocation needs.

According to Wind data, as of December 11, 95% of pension target funds in the entire market have positive returns this year, with the highest yield reaching 20.21%; among the funds established in 2022, more than half have positive returns over the past two years, with the highest reaching 8.01%