An Analysis Of Personal Pension Plans Development In China

With the development in society and economy, the medical condition and living standard of ordinary people also is improved. This leads extension of life expectancy and decreasing in fertility rate, the two cause aging-population. Under the background of aging population, the old-age income support is becoming a more important issue. To solve the issue, every country in the world builds and perfects its social security system. And the multi-pillar pension system is popular among many countries, which includes basic state pension, occupational pension, personal pension and informal support from family or relatives.Since2000, China has stepped into aging society. The absolutely number and relative ratio of ageing population is growing rapidly. By the end of2011, the aging-population in China had reached122million, which accounted for9.1%of the whole population. At the same time, the old-age dependency ratio reached12.3%. And the process of population aging in China will last over thirty years in future and demographic structure will become more and more old. China needs to perfect its pension system. Now China is building its multi-pillar pension system, which includes basic state pension, enterprise annuity and personal pension. But personal pension in China, which should be an important part of multi-pillar pension system, doesn’t have a clear design on its institution and allied policy. The development of personal pension is uncertain. In the paper, I first discriminate the concept and institution of personal pension, then summarize the personal pensions and their experiences in other countries, analysis the motivation and resistance of personal pension in China, finally put forward suitable strategy to develop personal pension in China. Six parts are included in the paper.The first part is the introduction of the paper, which sets out the background significance of the study and allied literature. From the perspective of aging-population and multi-pillar pension system, we discuss background and significance of the study. And we review the literature on multi-pillar pension system, personal pension and its allied policy in China.The second part:firstly we explain the concept, operation mechanism and characteristics of personal pension plan.Then we discuss the theoretical foundations of personal pension plan, which include mixed welfare economic theory, life cycle hypothesis and permanent income hypothesis.The third part:we explain development, operation mechanism and backgrounds of personal pensions in US and UK. The experiences of personal pension in USA and UK are:good design of personal pension’s institution and tax-favored policy by government; financial system that can support personal pension; the innovation of personal pension’s institution; social policy which form social view.The forth part:we introduce tax-deferred personal pension in Tianjin and Shanghai and summarizes their problems. The problems existing in tax deferred personal pension are:mode of personal pension is single; lacking of government policy, especially tax-favored policy, fighting between different governments departments on their own interest.The fifth part:we analyze factors that motivate and resistant development of personal pension in China. Factors which can motivate personal pension’s development in China are:the aging-population has great need for personal pension; multi-pillar pension system needs to be perfected by personal pension; higher household saving and its economic inefficiency are in favor of funding for personal pension.Resistances in the development of personal pension in China:government doesn’t have a clear design on personal pension and its allied policies; the defects of individual income tax system restrict personal pension’s coverage; residents in Chinese don’t easily accept personal pension, which is arranged by financial institution.The sixth part:according to the conclusion and experience above, we put the strategies to develop personal pension in China:design of personal pension plan should be fixable and various and other financial institutions should be encouraged to attend the plan; contribution should be in harness with other pension contributions, personal pension payments should be paid in form of annuity, and we should set time period for annuitization; the investment principle of personal pension should be quantitative portfolio regulation and restrict investment decision by participants.