Wealth managers eye China’s growing pension market

Foreign companies have begun to venture into financial services for the elderly in China, especially pension management.

As a result of Chinese policies encouraging foreign companies to assist the elderly and the aging Chinese population, foreign companies have ample opportunities to make a profit.

US-based Neuberger Berman, which manages $114 billion in pension assets worldwide, last September won approval from the China Securities Regulatory Commission to set up a publicly held pension fund company. totally foreign owned in the country. It was also one of the first foreign companies to receive such approval. This development has given the company, which has been doing business in China for 14 years, a new possibility: to join the growing private pension sector in China.

In China, a much healthier and more complete state pension system is being set up, with the participation of private pension plans to better support the country’s aging population.

“At the moment, we only offer high-yield cash long-term private funds to high-net-worth clients and institutions. But in the future, once we get the license and new policies come out that allow us to launch pension products for the middle class, we will be very active in it,” said William Hui, deputy managing director of Neuberger Berman Fund Management (China) Ltd.

Earlier this year, the State Council published guidelines on the development of private pension plans in China as a complement to the country’s existing pension system. They say that citizens covered by the state pension system can now open a personal account on an online platform built and managed by the Ministry of Human Resources and Social Security. They can then open an individual financial account at a commercial bank authorized by the platform to invest their pension payments in approved growth funds.

Neuberger Berman, based in the United States, obtained the approval of the China Securities Regulatory Commission last September.

Hui added that in the rest of the world, workers and investors are more inclined to put their money into personal pension products. Insurance companies and fund management companies manage these products, which offer the possibility of higher returns or greater flexibility in terms of investment. However, the Chinese are increasingly transferring their savings to personal pension plans.

At the end of last year, China already had more than 200 million people aged 65 or older. Together, they represent more than 14% of the country’s total population. These figures, together with the expansion of private or individual pensions, could have enormous commercial value. Experts say Chinese pensions could be especially important for foreign asset management service providers.

Theodore Shou, chief investment officer at Skybound Capital, believes the individual pension plan market has huge potential, and the involvement of foreign asset managers could spur product development.

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“Many Chinese asset managers have little knowledge or experience in designing products targeting the retirement or pension market. These are lessons that such managers can learn in other markets and can easily apply to the Chinese market, leading to a better developed product range that they can offer in the market,” said Shou.

Samuel Fischer, head of Deutsche Bank’s China Onshore Debt Capital Markets, says the bank’s wealth management subsidiary, DWS, has also expanded its business in China. He echoed Shou’s point, saying opening up the market to foreign players would greatly benefit both sides.

Theodore Shou, chief investment officer at Skybound Capital, believes the individual pension plan market has huge potential

In March, China expanded the scope of a pilot program for retirement wealth management products from four cities to ten. It also increased the number of wealth management subsidiaries of banks participating in the program from four to ten. By the end of June, 27 retirement planning wealth management products had been sold to 231,000 investors, with a total subscription amount of 60 billion yuan ($8 billion).

Article republished by the Chinese state media CGTN within the framework of an agreement between both parties to share content. Link to original article:https://news.cgtn.com/news/2022-09-08/Foreign-wealth-managers-eye-China-s-growing-pension-market-1d8Lh0IJT0c/index.html