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China’s private pension push marred by weak financial literacy, as ‘people still have no idea’

  • Experts break down why personal retirement accounts are failing to entice Chinese people to save for the future like the West has done for decades
  • After a stretch of trials in select Chinese cities, there is rising urgency to expand the underperforming pension plan as demographic challenges mount

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China’s private pension scheme is falling short of expectations due to low participation. Photo: AFP
Mandy Zuoin Shanghai

Now in her late thirties, Ruth Pan has not thought much about retirement, nor has she considered contributing to China’s newly implemented private pension plan.

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The sales manager from the eastern city of Hangzhou learned about the plan when it was launched there over a year ago as a pilot scheme, but she found it unappealing.

“I know there’s tax relief, but it’s quite limited. And as a middle-aged person with parents and kids to support, I need my money to be more flexible,” she said.

The voluntary personal pension fund, which has been in place for decades in many advanced economies, is still being trialed in just 36 Chinese cities. But it is expected to be extended nationwide this year as the country attempts to cope with unprecedented demographic challenges, including a rapidly ageing population.

However, like Pan, many people have remained hesitant to participate, and experts say this is owing largely to the product’s lack of attractiveness in economically difficult times, or because of consumers’ poor financial literacy.

With about 210 million people – more than 15 per cent of the population – aged 65 and above as of last year, China is looking to supplement its state pension fund that has become increasingly strained in recent years.

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