As an important component of the third pillar of pension insurance, the personal pension system has truly been established in China. The so-called personal pension refers to a supplementary pension insurance system that individuals voluntarily participate in, operate in a market-oriented manner, and receive support from national policies. Simply put, individuals voluntarily deposit a sum of money in a specific account to purchase eligible financial products with an annual limit of no more than 12000 yuan. This amount can be used as a special additional deduction to offset personal income tax in the current year, providing an additional source of pension after retirement. On December 15th, a two-year personal pension system was piloted in some areas of China and began to be implemented nationwide. According to the "Notice on the Comprehensive Implementation of the Personal Pension System" recently issued by five departments including the Ministry of Human Resources and Social Security and the Ministry of Finance (hereinafter referred to as the "Notice"), in the future, workers who participate in the basic pension insurance for urban employees or urban and rural residents in China can participate in the personal pension system, and the scope of relevant tax preferential policies will also be expanded to the whole country. The further expansion of the personal pension system reflects the country's emphasis on the construction of the elderly care system and highlights the importance of solving the current elderly care problem Professor Yan Zhipeng from Shanghai Advanced Institute of Finance at Shanghai Jiao Tong University said. On December 19th, Lu Shasha posted a note on a social media platform stating that she had purchased a personal pension bank savings product with a total amount of 12000 yuan. The product was offered as a 5-year lump sum deposit and withdrawal with an annual interest rate of 1.95%. Although the interest rate of regular bank savings products is not as high as that of ordinary banks, personal pension funds can be temporarily exempt from taxation at the end of the year, which can indirectly increase income, "she said. Lu Shasha told reporters that the current marginal tax rate for her annual income is 20%. If she saves 12000 yuan in personal pension for one year, she can be exempt from taxes by 2400 yuan that year. It is reported that Shaoxing City, where Lu Shasha is located, has only implemented a personal pension system this year. After receiving the news, she immediately consulted the bank and became the first person in her social circle to "eat crab". In fact, the personal pension system has been implemented in some regions of China for two years. In April 2022, the General Office of the State Council issued the "Opinions on Promoting the Development of Personal Pension Funds" (hereinafter referred to as the "Opinions"), which provided top-level institutional design for China to build a multi-level and multi pillar pension insurance system and standardize the development of the third pillar pension insurance. On November 25th of that year, the personal pension system was first implemented in 36 cities (regions) including Beijing, Guangzhou, Xi'an, and Chengdu. Over the past two years, the number of individuals opening pension accounts in various regions has steadily increased. According to data from the Ministry of Human Resources and Social Security, as of the end of November 2024, the number of individuals who have opened personal pension accounts in China has reached 72.79 million. According to survey data, 97.7% of respondents expressed satisfaction or basic satisfaction with the personal pension system, "said Jin Weigang, Vice President of the China Social Security Society and President of the Pension Branch." People are gradually forming the concept that 'in addition to basic pension, individuals can also make financial reserves for retirement,' which is an important achievement of the personal pension pilot program in the past two years. The 36 pilot cities (regions) are mainly large and medium-sized cities, but the issue of elderly care in small and medium-sized cities and rural areas is equally urgent Yan Zhipeng pointed out that after two years of exploration, personal pension has achieved positive results and valuable experience in practice. Next, it needs to be promoted on a larger scale. "With the acceleration of China's aging process, the importance and urgency of developing the personal pension industry are further highlighted. The expansion of the implementation scope of the personal pension system to the whole country is taking place against the aforementioned background. On the basis of the "Opinions", the "Notice" further clarifies relevant support policies, including expanding the scope of implementation, optimizing product supply, improving the conditions and methods for receiving, etc., pointing out the direction for future policy reforms. Our country's pension insurance system has three pillars. Basic pension insurance is the first pillar, occupational pension is the second pillar, including enterprise annuity and occupational annuity, and the third pillar is personal pension. "China's' first pillar 'basic pension insurance covers about 1 billion people, and 700 million people can open personal pension accounts in principle, except for about 300 million people who are already receiving pensions." Dong Keyong, professor of the School of Public Administration of Renmin University of China, said that the full implementation of the personal pension system is a major event in the pension finance sector, which will effectively help the construction of China's multi pillar pension insurance system. From a deeper perspective, the "expansion" of this policy is also reflected in the further enrichment of product types and the expansion of financial institution service content. Yan Zhipeng has been tracking and researching pension systems both domestically and internationally for a long time. In his view, the biggest highlight of this policy is the expansion of the investable scope of residents' personal pension funds. The Notice specifies that treasury bond will be included in the scope of personal pension products on the basis of existing financial products such as financial products, savings deposits, commercial pension insurance, public funds, etc; Include specific pension savings and index funds in the personal pension product catalog, and promote more pension financial products to be included in the scope of personal pension products. "Treasury bond and specific pension savings products have no credit risk, and the asset value is determined at maturity, which is suitable for investors who prefer a safe source of income during retirement." Yan Zhipeng introduced that there is a "bond ladder strategy" in pension investment. Taking 100000 yuan as an example, investors can divide 100000 yuan into five equal parts. The first 20000 yuan is invested in savings or bond products due one year later, the second 20000 yuan is invested in products due two years later, and so on... "By arranging investment through the above strategy, investors can obtain safe and stable cash flow every year in the next five years, and treasury bond and other financial products are suitable for this investment strategy." Yan Zhipeng believes that adding treasury bond and other products is conducive to the maintenance and appreciation of personal pension, providing more investment options for groups with different risk preferences. The addition of index funds is also worth paying attention to. The so-called index fund is not a stock of a single listed company, but rather an investment target of a certain type of index's constituent stocks, tracking the underlying index by purchasing all or part of the constituent stocks of the index. Buying index funds is actually resolving risks and helping the people make decisions, "Dong Keyong analyzed. Before this expansion, there were 200 fund products listed on China's personal pension platforms, including only two types of FOF funds (funds within funds): "target date funds" and "target risk funds". Index funds belong to passive investment products, and their management fees are much lower than those of general actively managed funds. Yan Zhipeng believes that enriching the types of personal pension fund investment products will further broaden the investment range available to investors and stimulate the innovation enthusiasm of financial institutions. According to the requirements, the China Securities Regulatory Commission has included the first batch of 85 equity index funds in the catalog of personal pension investment products. This includes 78 products tracking various broad-based indices and 7 products tracking dividend indices. According to data from the National Social Insurance Public Service Platform, the list of personal pension products in China has increased to 945, including 466 savings products, 285 fund products, 168 insurance products, and 26 wealth management products. Shanghai, where Chen Li (pseudonym) is located, piloted the implementation of a personal pension system in 2022, but it was not until the new policy included index funds in the personal pension product catalog that she decided to buy a personal pension. Chen Li plans to open an account and save money to offset personal income tax, and then use the money in his personal pension account to purchase financial products for investment when the price of the index fund is suitable, as the fee rate for buying index funds is lower and tax is temporarily exempted, killing two birds with one stone. It is worth noting that this policy requires financial institutions to provide investment consulting services, recommend appropriate personal pension products based on individual investment risk preferences and age characteristics, and encourage financial institutions to explore default investment services, where professional financial institutions help participants make choices and manage account funds. At present, there are more than 900 financial products on China's personal pension platform. If individuals are allowed to choose without guidance, the final result may not be satisfactory Yan Zhipeng purchased a pension fund when he opened the floodgates of his personal retirement fund. Although he had studied finance for many years, he still had no idea where to start when choosing investment products. In the end, he could only consider factors such as risk and return comprehensively and "snap his head" to choose one. "So far, he is probably still losing 3%". Professionals like me have headaches, let alone ordinary people who lack financial knowledge Yan Zhipeng stated that investing in personal pension products does not necessarily mean giving residents more freedom. "Allowing financial institutions to provide investment consulting, default investment, and other services can help bridge the gap between individuals and product providers, enhance investor welfare and long-term returns, and reflect the inclusiveness and people-oriented nature of personal pension financial services. There is still room for reform to increase the situation of receiving pensions, simplify the purchasing process, and enrich the channels for receiving pensions... With the implementation of the personal pension system nationwide, a series of reforms have also emerged. Many interviewed experts stated that many of the changes in the personal pension system this time are in response to issues discovered in previous work. But challenges still exist, and there is still room for reform. One important direction is to solve the problem of "hot account opening and cold deposit". After two years of trial implementation, although the number of personal pension account holders has exceeded 72 million, according to relevant institutions' calculations, as of the end of the third quarter of this year, the investment scale of personal pension in China was only 179 billion yuan. At the same time, data shows that currently, the actual contribution rate of personal pension funds in China is about 22%; Compared to the deposit limit of 12000 yuan, the actual amount deposited by individuals is only 25%. Some young people have not responded positively to personal pension policies. Sun Yudong, professor of the School of Public Administration of Renmin University of China and director of the Beijing Yin'an Institute of Pension Finance, found in scientific research and teaching that many of the MPA (Master of Public Administration) students he taught were over 30 years old, but few of them opened personal pension accounts, and these young people were not interested in relevant preferential tax policies. There is a core issue here, which is that when matching willingness, ability, and expectations for the future in multiple dimensions, there is still a lot of work to be done, "said Sun Yudong. He specifically mentioned tax incentives policies. The tax incentives for personal pension are reflected in the annual special additional deduction of personal income tax. Unlike other items, the tax incentives for personal pension depend on the level of the applicable marginal tax rate. In the promotion, it is often said that depositing 12000 yuan in a personal pension account can result in a maximum tax exemption of 5400 yuan. However, this 5400 yuan discount can only be enjoyed by people with an annual income exceeding 960000 yuan. For low-income groups, tax incentives for personal pensions are not enough to quench their thirst. In Sun Yudong's opinion, when personal pensions become an important reserve arrangement for pension funds, on the one hand, it is necessary to make everyone familiar with relevant tax policies, and on the other hand, the supporting strength of tax policies should also be increased. CITIC Securities predicts that by 2035, the scale of personal pension funds in China may reach 12 trillion yuan, and the proportion of equity assets in pension financial products may increase from the current 20% to around 40%. Personal pension funds will be fully deployed