Event: on April 20, 2022, the general office of the State Council issued the opinions on promoting the development of individual pension (GBF No. 7, 2022), which established an institutional framework for the third pillar from the overall requirements, participation scope, system model, payment level, tax policy, individual pension investment, receiving, information platform, operation supervision and organizational leadership. Although there is no breakthrough in the amount of tax preference compared with the previous documents, this opinion makes it clear that the personal pension account established through the personal pension information management service platform is the basis for participating in the personal pension account and enjoying the preferential tax policies, which is of great significance.
This document is the follow-up response and unification of several early pilot documents
1. In March 2018, the CSRC issued the guidelines for pension target securities investment fund (for Trial Implementation). In the early stage, the product was mainly operated in the form of fof through target date, target risk and other strategies. The guidelines mainly standardized the qualifications of management institutions, the conditions for fund managers, the criteria for pension target funds to select sub funds, etc;
2. In June 2018, the Ministry of finance, the State Administration of Taxation, the Ministry of human resources and social security, the China Banking and Insurance Regulatory Commission and the China Securities Regulatory Commission jointly issued the notice on carrying out the pilot of individual tax deferred commercial endowment insurance, which officially launched the pilot of individual tax deferred endowment insurance in Shanghai, Fujian Province (including Xiamen) and Suzhou Industrial Park. The notice also made it clear that after the pilot is completed, according to the pilot situation, Combined with the relevant situation of the construction of the third pillar system of endowment insurance, we will orderly expand the scope of financial institutions and products involved, and establish a management service information platform to realize the macro supervision of the third pillar of endowment insurance.
3. In May and August 2021, the China Banking and Insurance Regulatory Commission issued the notice on carrying out the pilot of exclusive commercial endowment insurance and the notice on carrying out the pilot of endowment financial products, respectively, allowing six pilot insurance companies (PICC, Guoshou, CPIC, Taiping, Taikang and Xinhua) to operate in Zhejiang and Chongqing, and four bank financial management subsidiaries (ICBC, CCB and China Galaxy Everbright) to operate in Wuhan, Chengdu and Shenzhen, Qingdao launched the pilot of pension products in four places. In February 2022, the Bank Insurance Regulatory Commission further expanded the pilot companies and regions of pension products of insurance and bank financial management subsidiaries;
4. As can be seen from the above-mentioned documents, the regulatory authorities have started to pilot the products of the third pillar since 18 years, and left a gap for the subsequent expansion of the financial institutions and product range involved, and the establishment of relevant information platforms and other unified frameworks;
The document stipulates many core elements such as participation scope, system mode and payment ceiling, and the tax preference mode needs to be clarified
1. We believe that the core element of this opinion is to make it clear that the personal pension account established through the personal pension information management service platform is the basis for participating in the personal pension account and enjoying the preferential tax policies. This account will undertake multiple functions such as payment, collection, payment and tax payment. Participants can purchase the corresponding products of insurance companies, bank financial management subsidiaries and public funds through their personal account, And carry out the conversion between products;
2. The opinion sets the current upper limit of individual pension payment per person to 12000 yuan, which is no further breakthrough compared with the tax preferential amount of “6% of taxable income in the current year or 12000 yuan, whichever is lower” in the notice on carrying out the pilot of individual tax deferred commercial pension insurance in 18 years. In addition, the opinions do not specify the specific tax preference system for individual pensions, that is, whether to increase the tax exemption base in the payment stage or the tax deferral policy in the receiving stage needs to be stipulated in subsequent documents;
Since the pilot of exclusive endowment insurance, the investment income is ideal, but the sales scale is weak
1. Since the financial products that can be purchased by individual pension accounts cover the exclusive products of many institutions such as insurance, bank wealth management subsidiaries and public funds, insurance companies will compete and complement other financial peers in the third pillar;
2. Compared with the corresponding products of other peers, the exclusive endowment insurance products have two unique advantages: one is that the duration is longer, and participants can generally receive insurance benefits after the age of 60 (the duration of bank financial sub products is generally 5 or 10 years); the other is that according to the different risk tolerance of customers, two accounts are set up, i.e. robust and aggressive, There is a distinction between the minimum interest rate and the upper limit of equity asset allocation (the bank’s wealth management sub product has only one account);
3. Since the surrender rate of exclusive endowment insurance products is limited and the minimum interest rate of exclusive endowment insurance products is lower than that of traditional insurance and savings insurance, insurance companies can allocate a higher proportion of equity assets. We believe that from a long-term perspective, the compound rate of return of exclusive endowment insurance products will be considerable; At the beginning of the year, each pilot company disclosed the settlement interest rate of exclusive products. The settlement interest rate of steady account is 4% – 6%, and that of enterprising account is 5% – 6.1%;
4. Compared with the ideal investment income, the sales of exclusive endowment insurance products are relatively weak. From the official pilot in June 21 to the end of February 22, the first six pilot companies have underwritten 71800 insurance policies with a total premium of 472 million yuan. The insured are mainly employees of Shenzhen New Industries Biomedical Engineering Co.Ltd(300832) and new business forms. We think the overall sales are weak or related to the channel, The matching between agent channels with high commission costs and exclusive endowment insurance products still needs to be run in and improved;
Investment suggestion: Although the amount of tax preference is no breakthrough compared with the previous documents, this opinion makes it clear that the personal pension account established through the personal pension information management service platform is the basis for participating in the personal pension account and enjoying the preferential tax policies, which is of great significance. Compared with peer products, exclusive commercial insurance has its unique advantages in terms of duration and different account design. The matching degree between channels and products still needs to be solved in the future development. Since March this year, we have seen some positive signals on the liability side of life insurance. We believe that it is mainly due to the weak performance of the equity market, the shift of asset allocation of some residents to savings insurance, and the fact that most companies no longer rely on the single product of serious illness, but implement diversified product strategies such as increasing life expectancy. We expect the decline of NBV of Guoshou Ping An and other companies to be significantly narrowed in the second quarter of 22; In terms of individual stocks, we recommend China Life Insurance Company Limited(601628) , which is superior to the industry on the liability side and has greater flexibility on the asset side, AIA, which benefits from the US interest rate increase and US $10 billion repurchase, and China property insurance, which has improved the pricing factor of auto insurance and upgraded non auto insurance control measures;
Risk tip: the growth rate of new orders is lower than expected, the income of agents continues to decline, the sales supervision is further tightened, the large-scale thunderstorm of non auto insurance such as liability insurance enterprises, property insurance, credit insurance, etc., the long-term risk-free yield has decreased significantly, and the equity market has fallen sharply.
