BlackRock CCB Wealth Management and China Construction Bank have called for stronger long-term capital support to drive China's pension finance sector, highlighting in a recently released white paper that a stable and transparent capital market is vital for promoting long-term investment, building wealth and ensuring a resilient pension system.

By the end of 2024, the total size of China's three-pillar pension system reached 15.66 trillion yuan ($2.2 trillion), accounting for less than 12 percent of GDP, indicating vast room for growth in the country's pension finance market.

If household savings can be effectively guided into pension investments, the scale of the voluntary private pension market — encompassing individual pensions and other personal pension financial services — could grow to 30 trillion yuan, according to the white paper.

China is rapidly entering a stage of deep population aging. As of the end of 2024, people aged 65 and above accounted for 15.6 percent of the population, and the dependency ratio for the elderly aged 65 and above rose to 22.8 percent, meaning that for every four working-age individuals, one senior 65 years old and above is reliant on them for support.

The white paper pointed out three key challenges in China's pension system.

While basic pension insurance now covers 95 percent of the population, it remains highly dependent on fiscal subsidies and runs a sizable deficit without them. Enterprise annuities reach only about 3 percent of workers, reflecting their limited scale. Meanwhile, despite more than 150 million people having opened private pension accounts, the contribution rate is below 21 percent, with modest tax incentives.

According to the white paper, China's replacement rate — the percentage of a worker's preretirement income that is paid out by a pension program after the worker retires — is only 45 percent. Based on 14,373 questionnaires and in-depth interviews, the white paper said that 67 percent of respondents worry about insufficient retirement income, yet only 24 percent are familiar with private pension policies.

As public awareness of retirement planning grows and institutional frameworks improve, China's pension finance market is entering a new phase of transition — from being policy-driven to market-driven. The next 10 to 20 years will be a crucial period for the rise of the voluntary private pension system and the optimization of national wealth structures, the white paper said.

The National Financial Regulatory Administration recently announced that a pilot program for pension wealth management products would be expanded nationwide. The program now covers all wealth management companies that have been operating for at least three years and have demonstrated prudent management.

Lou Feipeng, a researcher at Postal Savings Bank of China, said the regulatory notice marks the transition of China's pension finance sector from the pilot stage to scaled implementation, paving the way for changes in how individuals allocate their retirement assets.

Notably, the NFRA has significantly raised the fundraising limit for each company — from a fixed ceiling to a capital-based threshold, allowing fundraising up to five times the company's net capital (after risk deductions) as of the previous year-end. Lou said that linking fundraising capacity to a firm's capital strength will substantially expand the retirement wealth management product issuance limits for wealth management companies, while also channeling more long-term funds into the market.

Since the launch of China's pilot program for pension wealth management products in September 2021, the market has grown rapidly and entered a period of steady operation. As of Thursday, there were 51 active pension wealth management products in the market.

Experts said while the sector has seen stable growth in recent years, the number of pension wealth management products designed for private pension accounts remains limited, falling short of meeting demand.

The NFRA called for greater diversity in product design, encouraging pilot institutions to issue long-term products with maturities of 10 years or more, or with a minimum holding period of five years. It also supports flexible design in terms of purchase, redemption and dividend distribution, to better match investors' personalized retirement needs.