Insurance industry has much to offer Chinese investors

par Andrew Rickard | August 25 2016 11:33AM

China's current pension system is unsustainable. Research conducted by LIMRA and the Society of Actuaries (SOA) suggests that policymakers may turn to insurers in the west for guidance. 

Faced with an aging population and a growing number of retirees, the burden of offering social pensions is becoming increasingly heavy for the Chinese government. On average, men in that country retire at age 60 and women leave work at 55; although the average life expectancy is age 75, half those surveyed expect to live past age 85.

The joint study reveals that, despite this potentially long retirement, just one in ten respondents are “very involved” with managing their retirement savings, and only two out of ten have a formal retirement plan. More than half (56%) of the participants are relying on social pensions as a major source of their retirement income

"While China has made significant progress toward increasing the coverage of social pensions, its system is constrained by outdated policies and inconsistencies in providing benefits.  In our study only 17 percent felt they had enough savings to last the duration of their retirement," writes LIMRA research analyst Lauren Finnie. "Aware that their current system is not sustainable, Chinese policymakers are looking to other markets, such as the United States, for guidance. They recognize the need for a combined system that offers defined benefit (DB) and defined contribution (DC) plans to increase coverage for retirees."

The study found that 55% of Chinese consumers are interested in tax-deferred annuity products and notes that the government is contemplating a tax-deferred pension scheme. If the proposals are enacted and foreign companies are allowed to participate, North American and European insurers may be able to offer their expertise in dealing with these familiar retirement issues.

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