China’s central government recently announced a phased rollout of a new system of tax-favored individual retirement accounts to complement social security pension benefits and help address the challenges arising from a rapidly aging population. Vehicles for tax-favored private retirement savings are limited and under-developed in China. Enterprise annuity plans (EAPs) — the only tax-qualified voluntary defined contribution (DC) retirement arrangements, introduced in 2004 — are the most common employer-provided plans. As of June 2021, 28 million employees were covered by over 100,000 EAPs, with total assets of 2.4 trillion Chinese yuan (Ministry of Human Resources and Social Security [MOHRSS] data). This accounts for only 3% of the workforce, while assets equal less than 2% of GDP.
Though employers won’t have a financial or administrative role in the new system, the availability of the new program to employees (once rolled out) could affect employers’ future thinking on providing retirement benefits. Interest in supplemental retirement plans has been growing, if modestly, among the companies surveyed by WTW. As of 2022, 17% provide supplemental retirement plans (the majority being EAPs).