China’s workers are saving more for retirement, and doing so from an earlier age, as they stare down the barrel of a graying society and underfunded pension scheme.

A recent survey by asset management firm Fidelity International and Alibaba subsidiary Ant Fortune found that, on average, Chinese start saving for retirement at 35 years of age, down from 38 in 2021.

Survey respondents also said they were saving an average of 27% of their monthly incomes for retirement, up from 17% in 2019.

State-led urban pension funds and bank deposits are still the main source of income for retirees in China. Around 60% of survey respondents said they expect to rely on these two sources to support themselves after retirement.

Roughly half of respondents said their current incomes are insufficient to support their lives in the long run and that their incomes made saving for retirement difficult.

China is in the process of setting up a commercial pension scheme to supplement the current state-backed pension scheme and various voluntary employer-based pension plans. Under an April plan published by the State Council, China’s Cabinet, individuals will be allowed to invest up to 12,000 yuan ($1,850) annually into a tax-free pension account.

The need for additional sources of retirement funding has crystallized in recent years, as chronic underfunding of the pension system has been exacerbated by a sharp decline in the working-age population and a slowing economy.

The state pension scheme is able to pay out less than 50% of a retired worker’s former salary, former finance minister Lou Jiwei revealed in 2020, adding that this figure is likely to drop further in coming years. The World Bank advises a ratio of at least 70% for retirees to maintain their quality of life. The Chinese Academy of Social Sciences predicted in 2019 that the state-led pension fund may be exhausted by 2035.

To alleviate some of the pressure on the pension system, China has mulled “gradually delaying” its retirement age, which, at 60 for men and 50 for most women, is among the world’s lowest. An October survey found many retired workers were willing to reenter the workforce, though widespread age discrimination and other issues prevented many from doing so.

The new private pension plan is already attracting the interest of domestic and international banks and mutual funds, which see the scheme as a potentially lucrative new market.

“Retirement is only the beginning of a new life stage and pension investment should cover the whole lifecycle of investors,” managing director of Fidelity International Huang Xiaoyi told domestic media Tuesday. “Professional pension institutions should provide services for different age groups, including retired groups.”

Editor: Kilian O’Donnell.

(Header image: VCG)