Opinion: How to Fine Tune China’s Version of the Individual Retirement Account

As private pensions involve complex issues such as taxation, they may be difficult for ordinary people to understand, making them less willing to participate. Photo: VCG

China laid out a policy framework Thursday for launching its own version of the U.S.’ individual retirement account (IRA), a popular tool for promoting private pensions.

As of mid-2020, 37.3% of U.S. households (about 47.9 million) had set up IRAs. Because of differences between the two countries’ income tax systems and other factors, China’s private pension system will have difficulty reaching this scale. Whether the Chinese version of the IRA can contribute to the long-term healthy development of the capital market and boost retirement savings for individuals will depend on whether investment institutions can improve the rate of returns on pension investments and whether relevant government departments can improve the system’s design.

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