Regulatory Updates

November 7, 2022 China Pension Update

 China Updates Pension Guidelines

Over the past weekend, China’s State Council announced a new private pension scheme that will allow individuals to make voluntary deposits into a pension account and invest their pensions in stable financial products while offering tax incentives to the pension contributions paid by individuals. Here are a few specifics regarding the program:

The scheme allows Chinese citizens to contribute up to 12,000 yuan (about $1,661) annually to individual pension accounts that would be subject to closed-end management, according to guidelines released by the State Council.

Under the scheme, individuals will be able to invest their pensions in a range of financial products, providing more options for wealth-building and financial stability while opening up a lucrative new market for banks and financial companies.

To take part in the scheme, individuals can make voluntary contributions by setting up a personal pension account. The personal pension account must be opened through the “Personal Pension Information Management Service Platform” (the “Information Service Platform”). Yearly contributions are capped at RMB 12,000 (US$1,661). This limit will be adjusted in the future by the Ministry of Human Resources and Social Security and the Ministry of Finance (MOF) based on factors such as economic and social development.

After setting up an account, participants can use their pension contributions to purchase financial products from eligible financial institutes.

The new tax incentives for participants in a private pension are:

  • Deductions of up to RMB 12,000 (US$1,661) from the annual taxable income of participants.
  • Reduction of the tax burden on pension benefits from 7.5 percent to 3 percent. 

Income from investments would not be taxed for the time being and this policy is retroactive from January 2022.