The pressure of social pension is increasing, and the development of the three pillars is unbalanced. The development of commercial pension insurance has become the only way. 1) The aging of China's population has accelerated, and the pressure on the elderly has further intensified. According to the data of Qipu, the total fertility rate of women of childbearing age in China fell to 1.3 in 2020, lower than the international warning line of 1.5. Life expectancy continues to grow. In 2021, China's elderly population over the age of 65 reached 200 million, accounting for 14.2%, reaching a deep aging. Affected by the accelerated aging, the dependency ratio of the elderly in China has risen to 19.7%, and the pressure on the elderly has further intensified. 2) The development of the three pillars is uneven, and the third pillar needs to be filled urgently. At present, the development of China's three pillar pension system is uneven. The first pillar is dominant (accounting for 57%), and the first and second pillars are facing development bottlenecks: ① pillar 1: the coverage of basic pension insurance is wide, but there is a great pressure on payment at present. By the end of 2021, the number of participants in basic old-age insurance had reached 1.03 billion, accounting for about 71% of the country's total population in that year, and had entered the stage of low-speed growth. Since 2012, the income growth of the basic endowment insurance fund has been less than the expenditure growth on the whole. According to the calculation of the Chinese Academy of Social Sciences, the accumulated balance will be completely exhausted by 2035. At the same time, with the increasing dependency ratio of the elderly, the replacement rate of basic pension has decreased from 71.9% in 2000 to 44.8% in 2015. ② The second pillar: the market coverage of enterprise annuity is low, and its development is facing a bottleneck. In 2021, the enterprise annuity has covered 117000 enterprises and 28.75 million employees, but the balance scale and number of insured persons are only 42% and 2.8% of the basic old-age insurance. We expect that the capacity of the traditional advantageous market of enterprise annuity such as central enterprises and large state-owned enterprises has been nearly saturated, and the improvement of coverage will be hindered in the future. The occupational pension started late. According to the data of the Ministry of human resources and social security, the investment scale of occupational pension reached 1.29 trillion yuan by the end of 2020. We believe that there is an obvious ceiling because occupational annuity only covers organs and institutions.
The personal pension system was officially implemented, and the third pillar ushered in a flying encounter. On April 21, 2022, the general office of the State Council officially issued the opinions on promoting the development of individual pension, proposing an individual pension system based on the account system + tax preference policy. 1) The third pillar includes many types of financial products, involving banking, insurance, public funds and other financial institutions. As of April 2022, the scale of bank pension financing and public pension fof was 42 billion yuan and 106 billion yuan respectively. 2) At present, the supply of products in the commercial endowment insurance market is still limited, mainly focusing on old-age pension. In 2021, the premium scale of commercial endowment annuity insurance was 62 billion yuan, accounting for only 1.9% of life insurance. In order to promote the development of the third pillar, the pilot projects of tax extended endowment insurance and exclusive commercial endowment insurance were launched in April 2018 and may 2021 respectively. By the end of January 2022, the exclusive commercial endowment insurance had underwritten nearly 50000 insurance policies, with a total premium of 400 million yuan.
3) at present, the overall development of the pilot of individual tax extended endowment insurance is less than expected. Since March 2019, the number of new units and premiums of tax deferred pension insurance have shown a downward trend as a whole. By the end of October 2021, the accumulated premium income of tax deferred pension insurance was nearly 600 million yuan. 4) We believe that insufficient tax incentives and complex product system processes are important factors affecting the development of tax deferred pension insurance. ① At present, the preferential tax policy has not covered flexible employment groups such as freelancers and small self-employed households, and the increase of the individual income tax threshold in 2018 further reduces the attraction to low-income people. ② The underwriting process of tax deferred endowment insurance involves five subjects: the applicant, the insurance company, China Insurance Corporation, the tax department and the human resources department of the company. The tax deduction business process is complex, which reduces the purchase intention of the applicant.
From overseas experience, the account system + tax preference policy can effectively promote the development of personal pension. At the same time, we are optimistic about investment opportunities in the field of medical care combined with comprehensive pension services. 1) From overseas experience, tax preferential policy support and pension account system design are important driving forces for the rapid development of the third pillar. The American pension system is dominated by the second and third pillars, accounting for about 80% in total. The third pillar is mainly IRA accounts. Its rapid development is mainly due to: ① adopting the account system management mode, allowing multiple accounts to be parallel, and the insured can independently choose the corresponding account plan or combination. ② Preferential tax policies were introduced for payment and investment income to promote the rapid growth of IRA Account investment scale. 2) We are optimistic about the development of medical and nursing industries such as elderly care communities in the future. We believe that the pension community project can make positive contributions to both liabilities and assets: ① from the liability side, the pension community can achieve good coordination with the main insurance industry by linking insurance policy sales. As of August 2021, CPIC has issued more than 14000 pension community qualification letters. ② From the asset side, pension community investment has the characteristics of low return and long cycle, which naturally matches the long-term nature of insurance funds, and can provide stable and considerable income for insurance companies under the condition of ensuring the ideal occupancy rate. By the end of 2026, Taiping Life Insurance and Taiping Life Insurance had invested in a total of 60 pension projects.
Risk tips: 1) downward trend of interest rate; 2) Stock market volatility; 3) Guaranteed growth was less than expected.
