Blog: China to Roll Out Trial Retirement Savings Scheme With 20-Year Cap – Yicai Global

(Yicai Global) Aug. 1 — China’s ‘Big Four’ banks are preparing to introduce a pilot scheme for long-term retirement savings across five cities that have a longer maturity period than most deposit accounts, at up to 20 years, better yields and tax benefits to help those planning ahead for their old age to get the most out of their money.

Lenders in Hefei, eastern Anhui province, Guangzhou in southern Guangdong province, Chengdu in southwestern Sichuan province, Qingdao in eastern Shandong province and Xi’an in central Shaanxi province will launch the retirement savings pilot in November, the People’s Bank of China and the China Banking and Insurance Regulatory Commission said recently.

Each saver can deposit a maximum of CNY500,000 (USD74,028) at each bank. And each bank will manage a maximum of CNY10 billion, it said. The pilot scheme will last for one year.

“You can pay less tax if you buy retirement savings products using money from your pension account,” Zeng Gang, director of the Shanghai Institute for Finance and Development, told Yicai Global. They also have a longer deposit term of five, 10, 15 and 20 years. Normal bank deposits have a maximum maturity of five years.

The yields of retirement savings are likely to be a bit higher than that of five-year savings bonds because there are unlikely to be high-interest 10, 15 and 20 year assets in the short term, said Zhou Yiqin, general manager of the Department of Financial Asset Management Research at Financial Regulation & Law. Recently issued savings bonds of three and five years have interest rates of 3.35 percent and 3.52 percent, respectively.

The CBIRC is also experimenting with a pension fund management business to provide customers with professional pension consulting services and financial solutions as the country grapples with a rapidly ageing population. The regulator is drawing up guidelines and some well-established insurance firms will try out some products soon.

Editor: Kim Taylor

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