China’s private pension market could be US$969 billion opportunity for foreign firms by 2030: KPMG report
- Private individual pensions could be a US$969 billion segment within the overall US$3.8 trillion market by 2030, according to KPMG China and ASIFMA
- Foreign financial firms will need to consider their circumstances and specific competitive edges when deciding where to play in the market, report says
Ongoing reforms to China’s challenged retirement system present big opportunities for global asset managers wanting to tap into the 28 trillion yuan (US$3.8 trillion) potential market, according to a joint report by KPMG China and the Asia Securities Industry and Financial Markets Association (ASIFMA).
“There are opportunities for global asset managers in China’s pension market as the nation’s retirement programme undergoes a major programme of reforms,” she said. China’s pension market stood at 9.4 trillion yuan in 2020, and KPMG forecasts this to grow to 28 trillion yuan by 2030.
China’s reforms started with the basic pensions introduced under Pillar 1 in 1991, which was followed by the Pillar 2 reforms between 2004 and 2014, which introduced enterprise annuities and occupational annuities, with contributions from both enterprises and employees.
Pillar 3, which first began pilot schemes in 2018, opened the market to individual private pensions for the first time. To encourage participation in the private pension system, tax deductions were made available on personal pension contributions for the first time in January.
“The recent introduction of private individual pensions has created a new and potentially massive market,” said Shen. The Pillar 3 market is projected to grow to 4 trillion yuan under the current regulatory landscape by 2030 and could reach 7 trillion yuan if additional expected reforms are carried out, according to KPMG and ASIFMA.
