On October 26th, 2022, the Ministry of Human Resources and Social Security, the Ministry of Finance, the State Administration of Taxation, the China Banking and Insurance Regulatory Commission and the China Securities Regulatory Commission jointly issued the Implementing Measures of Personal Pension (No. 70, MOHRSS [2022], hereinafter referred to as the “Implementing Measures”), which is a significant step in improving the Chinese multi-level and multi pillar pension insurance system, as well as being an important initiative to regulate the development of the third pillar of pension insurance: a concrete approach to promote the implementation of views on the development of personal pension.

The specific provisions of the Implementing Measures are summarized as follows:

1. A personal pension account should be opened via the information platform through the national unified online service portal such as the National Social Insurance Public Service Platform, the National Human Resources and Social Security Government Service Platform, the e-social security card, and the “Pocket 12333 APP” or through commercial bank channels. Then, select a qualified commercial bank to open or designate the personal pension fund account (or designate it through other qualified personal pension product sales institutions).

2. The maximum personal pension contribution amount is RMB 12,000 per year, which can be paid monthly or annually, and it is accumulated in the natural year and recalculated in the following year.

3. Under the following circumstances, participants shall receive a personal pension on a monthly basis or in a lump sum when the following requirements are met:

a) Reaching the basic pension age (usually it is considered as 60 years old or above);

b) Completely losing the ability to work;

c) Settlement abroad;

d) Other circumstances prescribed by the State bureau.

4. When the participant receives the personal pension, the selected commercial bank shall verify the participant’s eligibility through the information platform and transfer the funds to the participant’s own bank account binded with the social security card.

5. The state provides preferential tax support to personal pensions. In fact, individual contributions to the personal pension fund account shall be deducted from the computation of the comprehensive income or business income for individual income tax purposes, according to the limit of RMB 12,000 per year and the investment income generated from the personal pension fund account shall temporarily not be subject to individual income tax. However, when individuals, who meet the requirements for withdrawing the amounts in the future, the amount will be subject to a tax   rate of 3%, which shall not be included in the comprehensive individual income calculation during the following month declaration or annual declaration.

6. Participants can decide independently on the types and amounts of financing products to be invested in their personal pension fund account. Also, the pension products’ sales institutions shall adopt the principle of “appropriateness of sales”, making a good risk reminder, and shall not actively recommend financing products beyond their risk tolerance to participants.

The personal pension system is a supplementary pension insurance system supported by government policy, voluntarily participated in by individuals, and operated by the market. It brings new choices to the pension market and adds strength to the pension system.

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