Research on Supporting Policies of Multi-pillar Pension System in China

Abstract

The multi-pillar pension system in China is unbalanced development. This paper analyzes the performance of the system arrangements of PPA and concludes that the system arrangements of PPA have positive effects on pension assets through analyzing the performance of Pension Protection Act (PPA) in the United States on Individual Retirement Accounts (IRAs) and employer sponsored retirement plans. Auto enrollment and TDFs have improved the performances, e.g. the participation rate and the return rate of the second and the third pillars. To improve the balance of the multi-pillar pension system, to increase the performances of DC accounts of Basic Pension Insurance Funds and Occupational Pension in China and to improve the long-term financial sustainability, auto-enrollment and default option should be introduced and such system arrangements including decreasing contribution rate of basic pension and tax incentive should be considered. Keywords—tax incentive; auto-enrollment; default option; multi-pillar pension system