CIRC lauds government’s pension reforms

Government has taken steps to address the huge funding gap and funding source inequalities of the pension system

Insurance News

By Gabriel Olano

The China Insurance Regulatory Commission (CIRC) has lauded the government’s efforts to implement reforms in the private insurance and enterprise annuity (EA) sectors.
Guangyi Zhao, director of the international department of foreign affairs division at the CIRC, spoke at the 2016 Organization for Economic Co-operation and Development/International Organization of Pension Supervisors (OECD/IOPS) Global Forum on Private Pension in Hong Kong, where he said that the current pensions system had a funding gap of RMB12.3 billion (US$1.8 billion) in 2014, mostly due to more withdrawals compared to contributions.
He also highlighted the imbalance in the pension landscape, where the market is concentrated mostly on public pensions, which is 81.6% of the market. This is huge compared to just 13.7% for EA and 4.7% for private insurance pension. As such, the government budget is under significant pressure.
However, Zhao said that there have been several improvements over the years, as the government enhanced the adequacy and coverage of the three-pillar pension system.
The average monthly payout for urban retirees increased by 70% from 2010 to 2015, reaching RMB2,200 (US$320). The public pension coverage also increased by RMB12 million (US$174,370) in 2015.
“As of the end of 2015, 75,500 local enterprises have established EA accounts,” Zhao added. “Total EA assets reached RMB953 billion at the end of 2015, an increase of RMB184 billion year-on-year. Also, the average annual premium income growth for private insurance sector was 16.9% between 2001 and 2014.”
He revealed that the Chinese government is continuing these reforms with new initiatives such as the “Measures for the Occupational Pension of Public Entities and Government Institutions” report.

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