The Current State of, Opportunities for, and Trends with Retirement Funds

Abstract

Affected by differences in the development of various capital markets and asset management industries, the quality of market players, and the development state in investment consultancy systems, there are only two main types of supplementary pension products in the overseas market: the general pension product and the dedicated pension product. These various industries and systems are represented by the examples of the United States, Chile, Australia, and Hong Kong. In this article, we analyze the general situation of China’s retirement fund market, uncover its growth opportunities and obstacles to further development, and then propose that the dedicated product model be established in China, and that retirement fund products be introduced as early as possible as part of preparations for the coming of the so-called “Pillar 3” and for the liberalization of individual choice for the “Pillar II”. At the same time, taking the suggested approach will also provide the appropriate investment tools for citizens to plan for their retirement independently. In this paper, we posit that there should be two types of products in China’s retirement funds market: the first being solution-based product products such as target-date funds and target-risk funds, and second, “instrument-based” products that are made of various combination portfolios of stocks, bonds and other types of funds. Such products are structured according to the age of the target investor. Meanwhile, investors should—with the long-term attributes of their retirement funds in mind—broaden their investment to an appropriate degree to include other assets such as overseas assets and alternative assets.