By Tian Hui, Research Institute of Finance, DRC

Research Report, No.338,2021 (Total 6403) 2021-11-15

Abstract: There are some similarities between the individual pension systems of China and the U.S.. In essence, they are all in line with residential pension special savings plan leveraged by preferential taxation and managed by financial institutions. In light of indices such as the population coverage and capital accumulation, China still lags far behind the U.S. regarding individual pension market development. Drawing on the experience and lessons of the U.S. would be conducive for China to sort out the key factors hindering the development in the following aspects. One, the integrated planning and top-level design of individual pension system are inadequate; two, China has adopted a decentralized product-based model in its pension savings collection as opposed to a centralized account-based fashion; three, the adaptability of tax incentives remains to be improved, which results in relatively weak inclusiveness; four, the types of financial institutions managing pension call for further enrichment to streamline the current insurance procedures; five, the system’s flexibility and portability need to be enhanced. With regard to the above-mentioned facts, targeted measures need to be taken to address these issues. Besides, it is necessary for us to give bigger play to the guiding role of common prosperity in institutional building, so as to prevent the widening gap between the rich and the poor from happening, which might be triggered by the individual pension system like the U.S.

Keywords: individual pension, China, the U.S.