Personal pension is equivalent to long-term savings and can be used to offset personal income tax, which is quite cost-effective! "Recently, Chen Liangda, a 54 year old resident of Beijing, just completed his annual comprehensive income settlement. He used the 12000 yuan deposited in his personal pension account to offset personal income tax." Everyone has an old age, so it's important to be prepared for it

As an important institutional design of the "third pillar" of China's pension insurance system, the individual pension system was launched and implemented in 36 cities (regions) including Beijing, Tianjin, and Shanghai in November 2022. In January of this year, the Ministry of Human Resources and Social Security stated that the personal pension system is running smoothly and will promote its full implementation.

However, there are also phenomena such as "hot account opening and cold deposit", low attractiveness to young people, and limited tax incentives in the implementation of the personal pension system. How to attract more young people to participate? What other aspects of institutional design need to be improved? A reporter from the Workers' Daily conducted an interview and investigation on this matter.

Over 50 million people have opened personal pension accounts

After depositing 12000 yuan in personal pension, Wei Zheng paid over 2000 yuan in personal income tax in one year! "On April 10th, 30-year-old Wei Zheng received the annual tax refund after the settlement of personal income tax and decided to continue" recharging "his personal pension account this year.

Personal pension is a system supported by government policies, voluntarily participated by individuals, operated in a market-oriented manner, and realizing the supplementary function of pension insurance. According to data from the Ministry of Human Resources and Social Security, as of the end of 2023, over 50 million people have opened personal pension accounts.

According to the Implementation Measures for Personal Pension and relevant personal income tax policies, the personal pension adopts a personal account system, and the payment is borne by the participating individuals, with an annual payment limit of 12000 yuan. The funds in the fund account can be used by participants to purchase savings deposits, wealth management products, commercial pension insurance and other products that comply with regulations.

At the same time, deferred tax benefits will be implemented for personal pension funds. In the payment process, according to the limit standard of 12000 yuan/year, it will be deducted from the comprehensive income or operating income based on the actual amount; In the investment process, personal income tax is temporarily not levied on investment returns; In the collection process, the personal pension received by individuals is not included in the comprehensive income and is subject to a separate personal income tax rate of 3%.

The most attractive aspect of the personal pension policy for Wei Zheng is the individual income tax incentives. Our company does not participate in enterprise annuity. In addition to basic pension and commercial insurance, personal pension is an important retirement reserve for me. In Wei Zheng's opinion, the amount of personal pension contributions is limited, and the upper limit of contributions should be increased to allow everyone to choose according to their own situation.

The personal pension system has been implemented for more than a year, and although the total number of accounts opened is quite large, the actual payment and investment situation is far from expected. Issues such as' participating but not paying ',' participating but paying less', and 'paying but not investing' are prominent, "Xue Huiyuan, Deputy Director of the Social Security Research Center at Wuhan University, told reporters.

Jin Weigang, Vice President of the Chinese Society for Social Security and President of the Pension Branch, introduced that statistical data shows that the number of people who actually store funds after opening an individual pension account is less than one-third, and the per capita storage funds are only more than 2000 yuan, which is significantly different from the annual deposit limit of 12000 yuan per person. The total actual storage funds are only over 20 billion yuan.

The deduction amount is limited and can only be claimed after retirement

35 year old Shi Kairui once considered contributing to a personal pension, but after careful consideration, he gave up. "The amount of personal income tax deduction is limited and can only be received after retirement. I now have both elderly and young relatives, and once I need to use money, I cannot withdraw my personal pension. It is more cost-effective to invest the same money in financial management and pay off my mortgage

33 year old Wang Dan also has no intention of contributing to his personal pension. She has worked in a bank for 12 years, and in addition to basic pension insurance, she also has occupational pension and commercial insurance. In her opinion, personal pension income is higher than regular wealth management and can be used to offset personal income tax, but the upper limit of contributions is relatively low, which is "a bit uneconomical".

The "China Pension Wealth Reserve Survey Report (2023)" released by the China Insurance Asset Management Association shows that about 40% of respondents have only heard of the personal pension system but are not familiar with it, and 12% of respondents have learned about the system for the first time through the survey.

For the public, personal pension is an emerging product with limited awareness and acceptance, "said Xue Huiyuan.

From a conceptual perspective, the immediate financial needs of young people, such as daily living expenses, supporting parents, and raising children, often take priority over pension planning. Xue Huiyuan believes that this may lead to young people not fully realizing the importance of accumulating pension funds and starting to plan and reserve pension funds later.

According to regulations, participants must reach the age of receiving basic pension, completely lose their ability to work, settle abroad, or meet other conditions that comply with national regulations in order to receive personal pension. If I start saving now, I can only receive it after more than 20 years, "Shi Kairui felt that the day of receiving money was a bit far away.

The "China Pension Wealth Reserve Survey Report (2023)" shows that for respondents with incomes between 100000 and 200000 yuan, the attractiveness of personal pension policies is relatively high, but for respondents in other income ranges, the attractiveness is beginning to decrease.

Regarding this, Xue Huiyuan believes that low-income individuals originally did not need to pay personal income tax, but after participating in personal pension, they still have to pay personal income tax at a rate of 3% when receiving it, so there is no incentive to participate.

Suggest establishing an emergency expenditure mechanism

For young people, the time required to withdraw personal pension is too long. If the policy allows a portion of personal pension to be withdrawn during the deposit period for needs such as supporting parents, it will be more attractive to young people, "said Shi Kairui.

Based on the consideration of humanization and the need for institutional promotion, Xue Huiyuan suggests establishing an emergency expenditure mechanism for personal pension. "In the event of special circumstances such as unemployment, education, serious illness, or accidents, insured persons may be allowed to withdraw funds in advance, but the amount, time, reasons, and other matters for early withdrawal should be clearly defined, and measures such as additional payment tax rates, refund of payment subsidies, and refund of tax incentives should be formulated

In recent years, the number of flexible employment personnel has been continuously increasing. Xue Huiyuan believes that the personal pension system should be moderately tilted towards low-income earners, individual workers, and flexible employees, as this group of young workers have unstable income, strong mobility, low quality of pension insurance participation, prominent phenomena such as missed coverage, withdrawal, and termination of coverage, and insufficient pension savings.

Xue Huiyuan suggested opening up different upper limit standards for different insurance coverage situations and encouraging low-income groups to actively participate. For example, different upper limit standards can be set based on income, occupational attributes, work experience, etc. Through differentiated system design, every young person has the opportunity to contribute to their personal pension.

According to data from the National Social Insurance Public Service Platform, as of April 2024, there are a total of 746 personal pension products available for selection, including 23 wealth management products, 465 savings products, 71 insurance products, and 187 fund products.

There are too many products, and many people don't know how to choose, and investment is risky, "said Shi Kairui.

Some banks are now promoting personal pension plans by opening accounts for the sake of opening accounts. Xue Huiyuan suggests that individuals should be helped to choose suitable personal pension products based on their own needs and risk preferences through business consulting, pension planning, and other methods, in order to reduce purchasing difficulty and information asymmetry.

(At the request of the interviewee, some parts of the article are pseudonyms)

Source: Worker's Daily, 6th edition, April 22, 2024.