A regulation to standardize management of pension funds is
likely to be issued next year, the Vice-Minister of Labor and
Social Security Liu Yongfu said yesterday.
Although China has released two notices on corporate annuities
since 2004, they are not legally binding.
"Therefore, we are working on a formal regulation, but it won't
be finished this year," Liu told China Daily yesterday at an
international corporate annuity forum.
The lack of a legal framework is a major problem facing China's
pension funds, said Richard Hinz, a World Bank advisor.
In 2005, 37 financial institutions, including insurers,
securities and trust companies, were able to act as pension fund
custodians, asset managers and bookkeepers.
And the list of institutions is likely to be adjusted or
expanded this year, Liu said.
"We will have a meeting in Shenzhen next month to discuss
whether to adjust the list or not," Liu told China Daily.
"Due to the rapid growth of pension funds in China, more
institutions are expected to be added to the list."
China's corporate annuities reached 90 billion yuan by the end
of 2006, jumping from 68 billion yuan in 2005.
According to the World Bank, China will be the world's
third-largest pension fund market by 2030, worth a total of US$1.8
trillion.
But the lack of a sound information release system or a uniform
preferential taxation regime poses major challenges for China's
corporate annuities.
"To make the management of pension funds transparent, there must
be a solid system to monitor the scale, participants and operation
of the fund," said Liu, adding the government would have a
supervisory role.
Although most local governments released favorable taxation
policies on pension funds last year, problems remain in terms of
criteria and non-standard implementation. And no such policies
exist for central State-owned enterprises now.
The ministry's main focus this year is establishing annuity
plans for small and medium-sized enterprises, said Cai Zhenhong,
director of the ministry's pension department.
(China Daily March 30, 2007)