The Rise of Retirement Finance: Why Are Account Openings Hot, but Payments Cold?(AI Translation)
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文｜财新周刊 丁锋 武晓蒙
By Caixin Weekly's Ding Feng and Wu Xiaomeng
2023年10月底召开的中央金融工作会议将养老金融纳入“五篇大文章”后，作为金融资源的重点投向之一，养老金融的热度飙升。
Following the inclusion of retirement finance in the "Five Major Tasks" during the Central Financial Work Conference held in late October 2023, the focus on directing financial resources towards retirement finance has surged dramatically.
银行在中国仍是最主要的融资渠道，如何布局养老金融举足轻重。最近几个月，几家大行在总行层面成立相关委员会或单独统筹协调部门，并阐述养老金融业务的框架和思路，商业银行养老金融的“打法”逐步明晰。
Banks remain the primary financing channels in China, making the layout of retirement finance critically important. In recent months, several major banks have established relevant committees or dedicated departments at the head office level to oversee and coordinate these efforts. They have also outlined the framework and approach for their retirement finance business, gradually clarifying the "playbook" for commercial banks' involvement in retirement finance.
目前，对养老金融并没有明确的官方定义，业界普遍采用中国人民大学董克用、孙博等2015年对养老金融概念的界定，指围绕着社会成员的各种养老需求以及应对老龄化社会的挑战所开展的金融活动的总和，包括养老金金融、养老服务金融和养老产业金融三方面。
Currently, there is no official definition for pension finance. The industry generally adopts the definition proposed by Dong Keyong and Sun Bo of Renmin University of China in 2015. It refers to the sum of financial activities carried out to address the various pension needs of society members and the challenges of an aging society. This includes three aspects: pension finance, retirement services finance, and elderly care industry finance.
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- 1. Post-October 2023's Central Financial Work Conference, banks have ramped up efforts to develop retirement finance, with major banks establishing committees and departments to oversee these initiatives.
- 2. The retirement finance framework consists of three main areas: pension finance, retirement service finance, and elderly care industry finance, although the latter faces significant operational challenges and hesitations from banks.
- 3. China's aging population, reaching 296.97 million aged 60+ by end of 2023, intensifies the need for robust retirement financial solutions and increased support from commercial banks.
In late October 2023, retirement finance was included among the "Five Major Tasks" of the Central Financial Work Conference, placing significant emphasis on directing financial resources towards retirement finance.[para. 1] This has further propelled the focus on retirement finance among China's major banks, which have begun setting up dedicated committees and departments to oversee these efforts, outlining a framework based on three key areas: pension finance, retirement service finance, and elderly care industry finance.[para. 2][para. 3][para. 4] Despite advancements, the area of financial services for the elder care industry remains notably underdeveloped.[para. 5]
A key challenge for banks in financing the elderly care industry arises from unclear definitions, lack of collateral due to light asset operations, and the nonprofit nature of many elderly care institutions, rendering them less attractive for commercial lending.[para. 6][para. 7] As China faces a rapidly aging population, now constituting 21.1% of those aged 60 and above by the end of 2023,[para. 8] there is a pressing need to develop robust retirement financial services to address these challenges.[para. 9]
The National Financial Regulatory Administration's "Guiding Opinions on the Banking and Insurance Sector's Work on Five Major Financial Tasks," issued on May 9, 2024, outlines key goals for retirement finance, including diversifying retirement financial products and increasing financial support for industries related to retirement and health.[para. 10] Liu Cheng, President of China CITIC Bank, emphasized the importance of top-level design and cross-departmental coordination within banks to effectively manage retirement finance.[para. 11][para. 12][para. 13]
Several banks have publicly shared their strategies in retirement finance. For instance, China Construction Bank (CCB) launched its "Jianyang An" retirement finance brand, focusing on coordination among branches, emphasizing retirement consultations, and integrating into the community-based retirement ecosystem.[para. 14] China Everbright Bank detailed its "12345" strategy, targeting different age groups' needs across five aspects of financial services.[para. 15] Similarly, the Bank of China established a Pension Finance Center to better coordinate its efforts in this domain.[para. 16]
The increasing number of aging individuals and the push for a third pillar in the pension system, individual pensions defined by personal accounts, reflect the broader transition towards comprehensive retirement finance. The "Implementation Measures for Individual Pensions" took effect in November 2022, with pilot programs running in 36 cities.[para. 17][para. 18] As of late May 2024, data indicated significant account openings but low contributions, suggesting the need for better incentives and product appeal.[para. 19][para. 20]
Retirement wealth management emerges as a pivotal area, with banks aiming to shift from product sales to comprehensive retirement planning. For example, China CITIC Bank focuses on financial planning across individuals' three main life stages with a "Three-Part Four-Step" strategy to cover balance income, risk prevention, retirement, and long-term investment planning.[para. 21][para. 22]
In the field of elderly care finance, while there is significant growth potential, numerous challenges persist. The lack of clear systems, standards, and credit policies further hampers the development of pension finance.[para. 23] Unclear industry definitions and classification issues lead to discrepancies in reported loan data, as highlighted by various banking entities.[para. 24]
To more effectively support the elderly care industry, comprehensive strategies and differentiated support for various segments within the industry are necessary. Implementing systems and standards with clear scopes and credit policies can enhance the mobilization of financial services for elderly care.[para. 25][para. 26] Despite hurdles, authorities such as the People’s Bank of China and banks like the Agricultural Bank of China and China Construction Bank indicate increasing efforts and investments in supporting the elderly care and retirement sectors.[para. 27][para. 28][para. 29][para. 30] Expanding financial services for elderly care requires addressing the complex needs specific to this industry, including light asset operations and public welfare constraints.[para. 31]
In sum, while significant strides are being made in the arena of retirement finance and elderly care, persistent challenges necessitate continued innovation and strategic investment by financial institutions to fully address the needs of China's aging population.[para. 32]
- China CITIC Bank
中信银行 - China CITIC Bank is focusing on a full lifecycle financial planning approach for different age groups, termed as the "Three Divisions and Four Steps." They aim to shift from product-centric to holistic retirement financial planning, addressing needs across "Z generation," "Middle generation," and "Silver generation" with personalized services, including income balancing, retirement cash flow management, and ensuring adequate funds for older clients.
- China Minsheng Bank
民生银行 - According to the article, China Minsheng Bank has established a pension financial committee at the head office level to coordinate its pension financial business, signaling a clear strategy for entering the pension finance sector. This move highlights the bank's dedication to meeting the financial needs related to aging and the pension sector.
- Bank of China
中国银行 - Bank of China (BOC) has established the BOC Pension Finance Center to coordinate its pension finance business. This center evolved from the department mainly handling corporate/occupational pensions. BOC's approach aims to streamline tasks and enhance external communications, with plans to fully support the pension finance sector's demands.
- China Construction Bank
建设银行 - China Construction Bank (CCB) officially launched its group-wide unified pension finance brand "Jianyang An" on February 29, 2024, introducing the "Ten Actions" plan. CCB prioritizes coordination among branches and subsidiaries, emphasizes features like "rental housing + pension," and aims to accelerate innovation, expand pension finance nationwide, and develop specialized pension finance branches to enhance comprehensive elderly services.
- China Everbright Bank
光大银行 - China Everbright Bank aims to "lead the pension finance comprehensive service among joint-stock banks," constructing a "12345" project: leveraging the "One Everbright" synergy, developing two professional tools ("pension ledger" and "pension planning"), focusing on three business segments (pension financial services, pension service finance, and pension industry finance), catering to four age groups, and addressing five needs (daily expenses, stable income, wealth appreciation, risk protection, and legacy transfer).
- Industrial and Commercial Bank of China
工商银行 - Industrial and Commercial Bank of China (ICBC) is actively involved in both the first and second pillars of the pension system. It offers comprehensive financial services related to social security reforms and holds leading positions in enterprise annuity fund management. As of 2023, ICBC's group-level pension management scale reached 4.1 trillion RMB. The bank is also focusing on enhancing its age-friendly services and financial products for the elderly.
- Agricultural Bank of China
农业银行 - Agricultural Bank of China (ABC) has prioritized supporting the elderly care sector by easing entry requirements and enhancing financing access for eldercare institutions. It plans to increase loans to these institutions, particularly in the inclusive finance segment, and support aged care and childcare services, as noted by ABC Vice President Lin Li during the bank’s annual performance meeting.
- Postal Savings Bank of China
邮储银行 - The article mentions that Postal Savings Bank of China, along with other major banks like ICBC and ABC, has plans and strategies in place for developing their pension finance business. However, specific details about the strategies or actions of Postal Savings Bank of China are not explicitly outlined within the provided content.
- Bank of Communications
交通银行 - Bank of Communications (BoCom) supports the aging industry with a loan balance of 24 billion yuan. This effort forms part of a broader initiative to enhance the financial inclusion and support within the sector, albeit the bank and other institutions still face challenges in defining and significantly expanding the scope of financial support for the elderly service sector.
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