The personal pension system has been piloted for more than a year, and it has played an important role in promoting the balance between supply and demand of personal pensions and ensuring the pension needs of residents. The next step will be to promote the full implementation of the personal pension system, further optimize the system design, and break the bottleneck of the development of the personal pension system.
The Ministry of Human Resources and Social Security recently announced that the personal pension system implemented in 36 cities and regions is currently running smoothly and has achieved positive results. The next step will be to promote the full implementation of the personal pension system.
The personal pension system has been piloted for more than a year, and has played an important role in changing the current situation of "one family dominating", the first pillar of China's pension system, promoting the balance between supply and demand of personal pensions, and ensuring the pension needs of residents.
From an individual point of view, tax benefits are available to personal income tax payers. On the one hand, China's individual income tax implements a progressive tax rate, paying 12,000 yuan to the personal pension account, and deducting it from the comprehensive income or business income, which can narrow the income tax base and reduce the income tax rate. On the other hand, investment income is not taxed, and the personal pension received is not included in the comprehensive income, and the individual income tax is calculated and paid separately at the rate of 3%, which is also the lowest marginal tax rate of individual income tax.
From the perspective of financial institutions, relevant banks and other financial institutions can benefit. Participants are allowed to purchase financial products such as savings deposits, wealth management, commercial pension insurance, and public offerings, and relevant banks and financial institutions can obtain a long-term and stable deposit, which is conducive to their investment and operation.
For the financial market, the funds in the personal pension account can only be withdrawn after retirement, which is equivalent to a long-term stable fund in the market, and the market volatility will be slowed down accordingly.
Of course, there are still some places that need to be improved in the personal pension system. For example, low- and middle-income earners are less motivated to participate. China's personal income tax threshold is 5,000 yuan, and employees with lower incomes do not need to pay individual income tax, and they lack the enthusiasm to invest in personal pensions. At the same time, the return on personal pension investment is not ideal. For a period of time, the fluctuation of the capital market has led to the loss of investment income of personal pension public offerings, which undoubtedly has a negative impact on the personal pension system and its participants who have just been piloted.
To promote the full implementation of the personal pension system, it is necessary to further optimize the system design and break the bottleneck of the development of the personal pension system. The first is to improve the rate of return on personal account funds in the basic pension system and enhance the enthusiasm for payment. At present, the rate of return on personal account funds in China is not high, so we can consider setting a minimum interest rate for personal accounts, and at the same time invest personal account funds in projects with higher returns and lower risks as much as possible. The second is to make a solid personal account. In the context of population aging, young people in some countries lack the enthusiasm to pay for the social pooled account of pay-as-you-go, so these countries will turn the social pooled account into a personal account, keep accounts for young people, and ensure that the principal and interest will be repaid in the future.
Author: Lin Shuanglin, Professor at Peking University HSBC Business School and Honorary Director of the China Center for Public Finance Research at Peking University).
*:Economy**.