Shanghai will strengthen efforts to launch commercial pension products that will help young people plan for retirement, the city's insurance regulator said Wednesday.
The trial program will encourage individuals to buy commercial pension products by allowing them to deduct contributions from their taxable income.
The Shanghai Bureau of the China Insurance Regulatory Commission along with finance and tax authorities are now finalizing the plan after years of research.
This is how the pension products will likely work. When a person buys such a product, contributions can be deducted from taxable income. When the person retires and starts drawing on the pension, the money will be added to taxable income. Thus, the person pays less tax overall through these pension plans. Such pension products already exist in Western nations.
The local regulator is also pushing forward research on a preferential tax policy on annuities. All the new programs are part of the government's efforts to shift the cradle-to-grave public pension system and force people to take more responsibility for their own retirement.
Shanghai also plans to set up an insurance exchange, where reinsurance can be developed to better leverage insurance resources. No timetable was available.
Shanghai is also studying plans to cut taxes on shipping insurance products as the city works to become a global shipping center by 2020.
Business tax worth more than 18 million yuan was exempted in 2009 on shipping insurance, including container insurance.
Shanghai was the fourth-biggest insurance market in China in terms of premiums in the first half. Premiums grew 35.9 percent in the first half to 47.7 billion yuan (US$7 billion) in the city. Shanghai outperformed national growth by 2.2 percentage points.
