China May Launch Retirement Target Fund to Address Growing Pension Problem, Says Sector Executive
Dou Shicong
/SOURCE : Yicai
China May Launch Retirement Target Fund to Address Growing Pension Problem, Says Sector Executive

(Yicai Global) Dec. 18 -- China may launch a retirement target fund next year as the funding industry and regulators are formulating new policies to address the pension problem in the country, said the executive of a fund management company. As China's population is increasingly aging, a pension crisis looms over the country, forcing the policy-makers to seek speedy solutions to the problem.

Retirement target fund's main goal is to promote individual pension by changing asset allocation according to investor's age, said Dou Yuming, chairman of Lombarda China Fund Management Co., a joint venture between China's GuoDu Securities Co. and Italian banking group Unione di Banche Italiane SpA [BIT:UBI]. It will allocate more equity assets when investors are young and gradually increase fixed income assets as investors grow older. Dou made the above remarks at a pensions forum held on Dec. 16, the Paper reported.

At present, China's pensioners rely on the state first and the businesses second for their retirement plans, Dou said. Individual plans come last. However, the aging of China's population is accelerating and will reach its peak by 2050, while the state pension reserve currently is only about CNY4 trillion (USD 605.2 billion), he warned.

Relying on corporate pension doesn't provide sustainable solutions either, said Dou. At present, corporate pension reserve is about CNY1.1 trillion, covering only about 20 million people. The five social insurances and one housing fund which companies provide to their employees amount to 40 percent of their total salary budgets, heavily burdening the firms.

Therefore, individual retirement plans and contributions will become an important source of pension funds in the future. In the US, 48 percent of the assets in personal pension system is currently invested in public funds, which are close to USD4 trillion. China can learn from the US experience in developing personal pension funds, Dou suggested.

Follow Yicai Global on
Keywords: Lombarda China Fund Management , Dou Yuming , Pension Funds