Publicly Offered Personal Pension Products Need to Enhance Attractiveness
Two years into the personal pension pilot program, despite the continuous expansion of personal pension funds, some funds have experienced significant net value drawdowns in the volatile market, leading to a less than satisfactory investment experience for holders.
In the view of industry insiders, facing the surging demand in the pension financial market, fund companies need to increase product innovation efforts to accurately match the needs of different types of customers in order to gain a competitive edge.
Continuous Expansion of Personal Pension Funds
On November 18, 2022, the China Securities Regulatory Commission announced the first list of personal pension funds and the list of fund sales institutions, including 129 retirement target funds from 40 fund managers and 37 fund sales institutions.
Over the past two years, the number of personal pension fund products has continued to expand. Data from the National Social Insurance Public Service Platform shows that as of November 25, the number of personal pension fund products has increased to 200, including 78 retirement target date funds and 122 retirement target risk funds.
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Looking at the list of personal pension fund sales institutions, the latest disclosed "Personal Pension Fund Sales Institution List" shows that as of September 30, there are 51 personal pension fund sales institutions, including 19 commercial banks, 24 securities companies, and 8 independent fund sales institutions.
More and more fund managers are laying out personal pension funds. As of November 25, over 50 fund managers have laid out personal pension funds. Among them, China AMC and E Fund each have more than 10 personal pension funds, while GF Fund, Southern Fund, CEF, ICBC Credit Suisse Fund, HuaAn Fund, Harvest Fund, Jiash Fund, CCB Principal Fund, and Yinhua Fund each have more than 5 personal pension funds.
The number of personal pension fund holders is steadily increasing. As of the end of the second quarter, the number of pension fund holders reached 1.031 million households, a year-on-year increase of 24%. Among them, the number of customers choosing retirement target date products exceeded 600,000 households, higher than the number of customers choosing retirement target risk products. As of the end of the third quarter, the total scale of pension funds reached 7.34 billion yuan, a year-on-year increase of 42%.
However, the scale of pension funds is quite different. As of the end of the third quarter, the scale of Xingquan Antai Active Retirement Five-Year Hold Mixed (FOF) Y was 825 million yuan, and the scale of Huaxia Retirement 2040 Three-Year Hold Mixed (FOF) Y was 645 million yuan. The scale of Huaxia Retirement 2045 Three-Year Hold Mixed (FOF) Y, E Fund Hui Cheng Retirement 2043 Three-Year Hold Mixed (FOF) Y, and other products exceeded 300 million yuan. However, most pension funds have not grown, with more than 100 pension funds having a scale of less than 50 million yuan, and several funds have a scale of less than 10 million yuan.
Multiple Measures to Enhance Product Appeal
To facilitate investors, this year, personal pension funds under the FuGuo Fund, Huabao Fund, JiaShi Fund, WanJia Fund, and others have entered the "Personal Pension Product Purchase Area" of the electronic social security card.
Some fund company official websites and the App's personal pension areas even support 24-hour application transactions. Xingye Global Fund stated that in the company's App personal pension area, transactions can be applied for at any time. If investors apply for transactions outside of trading hours, the system will register and initiate a deduction at 9:30 the next trading day.
To increase attractiveness to investors, this year, several pension funds have announced fee reductions, including FuGuo Xinwang Steady Retirement Target One-Year Hold Mixed FOF, BOC AnKang Balanced Retirement Target Three-Year Hold Mixed FOF, and Shanghai Bank HengTai Steady Retirement Target One-Year Hold Mixed Initiated (FOF), etc.
Taking Shanghai Bank HengTai Steady Retirement Target One-Year Hold Mixed Initiated (FOF) as an example, the product has adjusted the annual management fee rate for Class A fund shares from 0.8% to 0.5%, and the annual custody fee rate from 0.2% to 0.15%. The annual management fee rate for Class Y fund shares has been adjusted from 0.4% to 0.25%, and the annual custody fee rate from 0.1% to 0.075%.
Fund companies are also actively purchasing their retirement target funds. For example, the second-quarter report of Huaxia Retirement Target Date 2055 Five-Year Hold Mixed Initiated (FOF) shows that on May 14, the fund manager used proprietary funds to purchase 215 million shares of the product, with a transaction amount of 150 million yuan. On May 17, it purchased an additional 4.2786 million shares, with a transaction amount of 29.762 million yuan. Similarly, on May 7, HuaAn Fund used proprietary funds to purchase 154 million shares of HuaAn Retirement Target Date 2040 Three-Year Hold Mixed Initiated (FOF), with a transaction amount of 125 million yuan.
The Development of Personal Pension Funds is a Long-Term Task
Over the past two years, affected by market fluctuations, the performance of some personal pension funds has been lower than expected. Choice data shows that more than 30% of personal pension funds have negative returns since their establishment, with some products losing more than 10% since their establishment.
Jiang Xiangyang, Chairman of Bosera Fund, said that the development of personal pension funds is a long-term task, "In recent years, the market has fluctuated greatly, and most retirement target date funds have a high proportion of equity investment, leading to a significant decline in net value, resulting in a poor investor experience."
Gao Ying, Director of Pension Investment at Ping An Fund, said that due to the multi-layered investment and multi-asset allocation involved in pension FOFs, the product structure is relatively complex, making it difficult for investors to understand and assess the real risks and returns of the products. In addition, the net value of some pension FOFs fluctuates greatly, and it takes a long time for investors to understand the necessity of long-term investment. In the investment of personal pension funds, it is appropriate to increase the variety of underlying investable products to enhance the diversity of profit sources in the portfolio.
In Jiang Xiangyang's view, the cognition and experience of residents towards pension products need to be improved. Currently, the quota and coverage of the third pillar tax deferral are limited. To meet the strong demand for pension investment, a rich fund product system needs to be developed for docking. Most residents have a low-risk preference and need to develop products with low fluctuation for docking. At the same time, pension products span the entire life cycle of investors, with a large period, wide coverage, and multiple scenarios involved. For different risk preferences, different income situations, and different withdrawal requirements of pension investment scenarios, it is necessary to further increase product innovation efforts to accurately match the pension investment management needs of different types of customers.