China eyes new investment plan for USD 497 bln pension fund

China is mulling a diversified investment plan for its whopping USD 497 billion pension fund to boost its value, amid worries about the low returns over the past years, a senior Chinese official today.
"The future investments of the fund will be diversified to avoid putting all the eggs in one basket. Investments will include bank deposits, treasury bonds, projects with good prospects, among others," said Yin Weimin, China's human resources and social security minister.
"We will give full play to the market mechanism and use help from professional investment agencies to avoid risks in investment," he said.
Outstanding contributions to China's pension fund stood at 3.06 trillion yuan (USD 497 billion) at the end of last year, official data showed.

The Social Security Fund (SSF) a social security strategic reserve for China's future aging population and with assets of 1.24 trillion yuan (USD 367.3 billion) by 2014, has a bigger investment scope than the pension fund and is allowed to invest in domestic and overseas stocks as well as fixed income assets.
Money in the fund is now only allowed for deposits in banks and buying treasury bonds.

That means a one percentage point increase in investment return ratio will bring about more than 30 billion yuan of profits.
China had about 185 million people above the age of 60, or 13.7 per cent of the 1.3 billion population.

The figure is expected to surge to 221 million in 2015, including 51 million "empty nesters," or elderly people whose children no longer live with them, which makes it incumbent on the part government to improve their social security management involving large amount of funds.
The low investment return of the fund for urban retirees from enterprises has aroused concerns, which kicked off operation in the early 1990s, as its annualised investment yield hovered as low as around two percent in the past several years, falling short of the consumer price index (CPI), a main gauge of inflation, state-run Xinhua news agency reported.

A draft plan on the fund's investments is basically in place and will be submitted to the nation's top authorities for approval in the second half of this year, Yin said.
"Only a certain percentage of the fund will be allowed for stock market investment, and particular caution will be given to avoid risks," stressed Yin, adding that the government will also step up supervision over the fund's operation.
In China, private urban employees pay for their pension before retirement and usually get a pension equal to about half of their final salary.