(Source: China Economic Times, March 5, 2025)
As my country's population continues to age, the improvement and development of the personal pension system has become an important issue to ensure people's happy life in their later years. Sun Jie, a member of the National Committee of the Chinese People's Political Consultative Conference and deputy dean of the w88 casino of Insurance at the w88 casino, put forward policy suggestions for strengthening the construction of personal pension infrastructure during the National Two Sessions. She provided forward-looking and practical policy suggestions for strengthening the construction of personal pension infrastructure and helped my country's pension security system move towards a higher-quality development stage.
Sun Jie pointed out that commercial pension insurance, as an important form of personal pension, needs to focus on managing longevity risks in the context of the increasing life span of the population, and it is urgent to strengthen the infrastructure construction of the personal pension system.
Starting from December 15, 2024, the personal pension system will be rolled out from 36 pilot cities (regions) to the whole country, which means that the personal pension system will be fully implemented, the scope of implementation of preferential tax policies will be expanded, and the types of commercial pension financial products will be further expanded. At present, the number of people with personal pension accounts in my country has exceeded 70 million. As of January 15, 2025, there were 956 special personal pension products, including 466 savings products, 287 fund products, 177 insurance products, and 26 financial management products. Insurance products accounted for 18.5%. It is generally believed in the industry that insurance and pensions are naturally compatible. The long-term and certain product benefits can meet customers’ needs for the security of pension funds and have unique advantages.
However, Sun Jie mentioned that there are many problems in the current operation of the personal pension system. On the one hand, the structure of personal pension products is not ideal enough, and personal pension products and services need to be improved. my country's pension financial market is immature, and the advantages of different types of pension products have not been fully utilized. From the supply side, the investment period of personal pensions should be mainly mid- to long-term. Judging from the more than 900 personal pension products currently on sale in funds, financial management, and insurance, bank savings and financial management products are the majority, accounting for more than 50%, and the homogeneity of products is serious. In addition to the long-term nature of insurance products themselves, most funds and financial products are short-term products of 1 to 5 years. In the context of falling interest rates and insufficient supply of high-quality assets, the choice of savings investments will affect the level of investment returns to a certain extent. Financial institutions with pension management experience are urgently needed to play their role and innovate and develop more pension financial products that provide medium and long-term stable returns.
On the other hand, the operating risks of insurance institutions are increasing, and the construction of a longevity risk management mechanism is urgent. Judging from the distribution and product form of the current 177 personal pension products in the insurance category, annuity insurance accounts for more than 50%, and the receiving age can be extended to life. During the specified receiving period, people can receive a fixed amount of pension every year, and they can also receive it for a long period of time, which can be as long as their life. Although this is an advantage of pension annuity insurance, it also brings longevity risks to insurance companies that provide personal pension products with lifetime benefits. The so-called longevity risk is the financial risk of pension payments to insurance companies due to the uncertainty of future mortality, which causes people's actual life span to exceed their expected life span. If a longevity risk transfer and diversification mechanism is not established in a timely manner, the more long-term protection and lifetime benefit personal pension products an insurance company provides, the greater the longevity risk caused by the uncertainty of mortality, which will bring more operating risks to the insurance company and may even cause the insurance company to go bankrupt.
In response to these problems, Sun Jie put forward a series of countermeasures and suggestions.
First, establish a standardized survival rate or mortality improvement index (longevity index) as soon as possible. It is recommended that the Ministry of Human Resources and Social Security and the State Administration of Financial Supervision jointly participate, with the participation of the National Health Commission and the Insurance Industry Association, focusing on social security data, integrating with medical data, and insurance data, to collect statistics and forecast changes in the mortality rate of my country's population, and to develop a set of standard market-based mortality or survival rate indexes, thereby minimizing basis risk and providing a basis for reasonable pricing of longevity risk securitization products.
The second is to accelerate the exploration of new risk transfer mechanisms for longevity risks of personal pensions with Chinese characteristics. As a financial innovation, longevity risk trading not only requires a variety of financial hedging tools that are compatible with the capital market, but also requires the regulation and supervision of multiple participating entities around market access, trading behavior, information disclosure, etc., including personal pension plan sponsors, insurance companies, reinsurance companies, rating agencies, etc.
The third is to establish a longevity risk hedging trading market with the Shanghai Insurance Exchange as the technology platform as soon as possible. Insurance associations, insurance industry associations, and major market participants should be guided to further deepen risk analysis around the development of personal pension products that can be paid for life and long-term guaranteed, form market-recognized longevity risk measurement standards, classification schemes, and pricing models as soon as possible, and explore the hedging experience of longevity risk on an international scale. Combined with the capital market, longevity risks are packaged and transformed into financial derivatives circulating in the capital market, realizing the securitization of longevity risks, transferring longevity risks to a wider range of investors, and solving the operational risks faced by market participants.
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