Basic pension insurance has a wide coverage, but currently has a relatively high payment pressure. By the end of 2023, the number of people participating in basic pension insurance accounted for 76% of the total population that year, and has entered a period of slow growth. The accumulated surplus largely depends on various levels of financial subsidies. According to the estimate from the Chinese Academy of Social Sciences, the accumulated surplus will be completely depleted by 2035.
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The aging of China's population is accelerating, and the pressure on retirement is further heightened. According to data from the seventh national census, the total fertility rate of childbearing women in China has dropped to 1.30, lower than the international warning line of 1.5. Life expectancy continues to rise. The number of people aged 65 and over in China had reached 220 million by 2023, accounting for 15.4% of the total population, well above the threshold of being a deeply aging society (14%).
The development of commercial pension insurance is necessary due to the increasing pressure on social pensions and imbalanced development of the three major pillars. The three major pillars have uneven development, with the first pillar dominating (with a proportion as high as 57%) and facing bottlenecks in development. The second pillar includes enterprise annuity, which has insufficient market coverage, and is constrained by bottlenecks in development. The predicted size of the potential demand for new social retirement beds in China by 2060 is between 2 to 4 million.
Commercial insurance companies have actively participated in the investment and construction of retirement communities in recent years, forming three investment models: heavy assets, light assets, and a combination of the two.
The overall level of retirement services supply in China is insufficient compared to the strong demand for such services.
Pension finance covers multiple industries and product types, among which insurance products play an important role. The personal pension system began to be implemented in 36 cities in 2022, with the investment of insurance products playing an important role. The commercial pension insurance market has a diverse product supply, mainly based on annuity insurance. According to data from the State Administration of Financial Supervision in January 2024, commercial insurance pensions have accumulated over 6 trillion yuan in retirement funds and cover nearly 100 million people. The trial operation of personal tax-deferred pension insurance has been limited, and it has now been incorporated into the personal pension system. Exclusive commercial pension insurance has entered a phase of normal operation. By the end of 2023, the number of policies was about 740,000, with an accumulated reserve of more than 10.6 billion yuan. Commercial pension insurance is a new type of pension insurance business, which began trial operation in early 2023. The number of accounts opened had exceeded 590,000 by the end of the first year of trial operation, with China Life Retirement ranking first with 374,000 opened accounts and a stock scale of 7.9 billion yuan.
Community retirement and home-based care co-development to create a full-process elderly care service. 1) Insurance companies actively laying out the elderly care services industry can have a positive interaction with their own insurance main business, and through the "insurance + elderly care services" ecosystem, enable long-term growth. 2) In recent years, insurance companies have actively participated in investment and construction of elderly care communities, and have developed three major investment models of heavy assets, light assets, and the combination of heavy and light assets. Among them, Taikang Life is one of the insurance companies that earliest explored investing in elderly care communities, mainly adopting the heavy assets model. Its elderly care community Taikang Home connects with rehabilitation hospitals, launching the distinctive Chinese medical-care combined mode. 3) Since 2022, with the establishment of the 90/7/3 elderly care model in China, some insurance companies have also been exploring home-based elderly care services. In September 2022, Ping An Insurance released the home-based elderly care brand "Ping An Butler", a three-in-one elderly care butler, including smart butler, living butler, and doctor butler. As of December 31, 2023, Ping An's home-based elderly care services have covered 54 cities across the country, with over 0.08 million customers qualified for home-based elderly care services, and customers overall giving positive evaluations.
Risk warning: 1) Trend of downward interest rates; 2) Stock market volatility; 3) Slower growth in protection type.