On 20 March 2019, Heng An Standard Life (HASL), a joint venture between Standard Life Aberdeen (SLA) and Tianjin TEDA International, was pleased to announce that it has received local regulatory approval to move forward with developing its pensions business in China. This makes HASL the first, and so far only, joint-venture business in China to hold this license, marking the beginnings of an exciting journey for HASL in one of the most promising pensions markets in the world.

SLA has been active in the Chinese market for over 20 years, opening its first regional offices in 1999 and 2003. In this long-standing commitment to China, SLA has been increasingly rewarded: in addition to the license to establish a pensions insurance company, its local investment business obtained wholly-foreign owned enterprise status in 2015 and has subsequently operated as an investment manager in China since 2017.

The granting of the license comes at an extremely challenging and equally exciting time for the Chinese pensions market. By population, China is the largest country in the world and according to OECD data, the share of Chinese population over age 65 is expected to triple between 2015 and 2050, with over 65s representing 30%. Pensioners in China mainly rely on state pension provisions offered by the Public Pension Fund, one of the biggest state pension funds in the world. There is, however, increasing recognition that the pension system needs to substantially develop beyond the state pension system in order to provide adequate coverage and shoulder the burden of an increasingly ageing population.

While the occupational pensions system has yet to take off, the highest expectations are placed on the private pensions market.  Last year, the Chinese Government introduced a deferred tax regime for private pension holders which currently runs on a trial basis in three provinces and is expected to be rolled out on a wider basis in the near future. The tax concessions have put the private pensions market in the spotlight and the market is expected to see a considerable uptake in product offerings and a broad range of providers entering the market.

HASL is well placed to compete in this developing pensions market. HASL can benefit from SLA’s expertise in the UK pensions market – a market which receives increasing interest from Chinese regulators keen to learn more about the UK’s experience with auto-enrolment and pensions freedoms. More importantly, HASL can build on SLA’s long-term presence in China and further develop strategic relationships, enhance local expertise and harness the trust of clients.