JPMorgan, UBS and others vie for bigger share of China’s pension market

4:08 am Wednesday, November 30th, 2022

By Selena Li and Jason Xue

HONG KONG (Reuters) – Chinese ventures of foreign asset managers including JPMorgan, Warburg Pincus and UBS are gearing up to expand their retirement offerings, as the country officially unveiled a private pension system last week.

China on Friday launched its first private pension scheme in 36 cities as it grapples with a rapidly ageing population, allowing individuals to open retirement accounts at banks to buy pension products ranging from deposits to mutual funds.

The move marked the official launch of China’s version of IRA, or Individual Retirement Accounts in the United States, a private pension scheme that offers tax advantages for individuals saving for retirement.

As part of the new system, local domestic workers covered by China’s public pension insurance can participate in the private pension scheme and contribute up to 12,000 yuan ($1,680) per year to their individual accounts and receive tax benefits.

Global asset managers including BlackRock and Fidelity have boosted their presence in China in recent years, partly lured by its nascent private pension sector that is expected to surpass $1.7 trillion by 2025 from $300 billion now.

“In the future we will further complete our pension product offerings by launching … funds that meet the demand of investors with various age profiles and retirement priorities,” said Andrew Wang, chief executive of UBS SDIC Fund Management, a joint venture between UBS and China’s State Development & Investment Corp.

UBS SDIC Fund Management currently has one mutual fund, which qualifies for the private pension scheme, among a total of 129 funds provided by 40 Chinese and Sino-foreign fund houses.

Eddy Wong, chief executive of China International Fund Management (CIFM), a joint venture between JPMorgan and Shanghai International Trust Co., said China’s individual pension market has “huge potential and room for development”.

One of the priorities for the firm is to bring “innovative pension product designs” to the market, Wong said, for which his team is leveraging global experience with on-the-ground research to offer retirement solutions with local characteristics.

Warburg Pincus’ China venture, Hwabao WP Fund Management (Hwabao WP FM), has set its eyes on retirement investors within Baowu, the majority shareholder of the fund house and also China’s national steel champion with more than 45,000 employees.

“Serving the staff of Baowu will be our starting point and we plan to expand coverage to employees of all firms in the steel industry,” said Wu Liang, Shanghai-based general manager of the internet finance department at Hwabao WP FM.

Chinese and global insurers and fund houses have been developing and promoting products for the local pension market, while local banks are offering incentives to lure investors to open accounts as they seek to tap into a new market.

“The first movers in China’s pension market enjoy an advantage,” said Howhow Zhang, Greater China wealth and asset management strategy and transactions leader at consultancy EY.

“I think Chinese retail investors have a learning curve to climb,” said Zhang, adding that “education efforts will fall on the shoulders of both asset managers and distributors.”

($1 = 7.1426 Chinese yuan renminbi)

(Reporting by Selena Li in Hong Kong and Jason Xue in Shanghai; additional reporting by Samuel Shen; Editing by Sumeet Chatterjee and Ana Nicolaci da Costa)