CHINA - China's enterprise annuity system could become more market managed rather than come under the umbrella of the state-controlled social security fund in the wake of the Shanghai government pension scandal.
The government is considering reforms that would prevent the majority of enterprise annuities coming under direct control of local government officials.
An official in Shanghai, who wished to remain anonymous, said it was a move to make pension savings more transparent and prevent cases of corruption. It would mean that savings cash would not come under the direct control of local authority boards. “The government wants to build trust among retirement savers,” he said.
However, provincial social security organisations will continue to oversee the promotion, consultation and the setting up of annuity plans for the foreseeable future.
According to state figures, 24,000 companies had set up enterprise annuities in China last year.
Officials at the Shanghai Labour and Social Security Bureau have been accused of lending several hundred million dollars of city pension fund money to a private real estate developer.
As many as 100 government officials have been sent to Shanghai to audit the fund. According to Yan Hu, a Beijing-based consultant, it is not the first time government officials have been caught using social security money.
The cases have put pressure on the government to ensure that enterprise annuities are protected creating greater trust in the 401(k)-style system, Yan said.
“In general, this could be a very good thing for the enterprise annuity system,” she said. “It could represent an opportunity to clean up misdoings.”
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