What Are the Most Common Annuity Risks?

Annuity refers to a series of payments that are received and paid in equal amounts each time within a certain period, and is usually expressed by A. Annuities include insurance premiums, pensions, depreciation under the straight-line method, rent, equal installment payments, equal installment payments, etc. Annuities have equal and continuous characteristics, but the interval between annuities is not necessarily one year. Annuities can be divided into four types: ordinary annuities, prepaid annuities, deferred annuities, and perpetual annuities. ^[1]

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Annuities are derived from

China has initially established a three-pillar pension system consisting of basic pensions, supplementary pensions for enterprises, and personal savings pensions, of which enterprise annuities and occupational annuities fall into the second pillar. The development of the second pillar of old-age security has a very important role in establishing a sound social security system and improving the quality of life of employees after retirement. At present, the problems affecting the development of enterprise annuity and occupational annuity systems are mainly the imperfect tax preferential policies for pensions, the non-mandatory nature of enterprise annuities, the scope of investment for pensions to be further expanded, and the "dual-track system" for pensions of enterprises, institutions and institutions "Wait. In response to these issues, the following four suggestions are made:

The first is to improve the preferential tax policies for pensions. Preferential taxation policies will greatly stimulate the inherent motivation of enterprises to establish pension systems for employees. Drawing on the experience of the United States and the successful examples of tax incentives in other countries, it is suggested that in the operation of enterprise annuity, the tax premium range of corporate payments should be appropriately increased, and the method of delayed tax payment on individual contributions should be adopted. According to the calculations of the relevant departments, if the current tax is delayed or reduced by 1 yuan, a pension fund of more than 20 yuan can be established. In the short term, the reduction of corporate annuity tax may reduce the country's current fiscal revenue, but if the enterprise annuity is reinvested in the capital market, the state's tax revenue from the capital market may be much greater than the current tax loss. Moreover, for enterprises, preferential tax policies can encourage and stimulate enterprises to participate in the construction of old-age security for employees.
Second, the pension system has gradually changed from "non-compulsory" and "semi-compulsory" to "compulsory". According to Article 16 of the latest "Opinions on Deepening the Reform of the Income Distribution System Approved by the State Council": "Improve the basic endowment insurance system. Promote the reform of the endowment insurance system of public institutions by category, study and promote the reform of the pension insurance system of civil servants. Develop enterprise annuities and occupation Annuities. "This shows that the central government's determination to reform the pension system of public institutions and civil servants has been determined, and will continue to vigorously develop enterprise annuities and occupational annuities. Although the guiding spirit and top-level design already exist, it is important to accelerate implementation and advancement according to policies.
Practice has proved that a completely voluntary but not mandatory system has a very limited effect on the construction of an old-age security system. Enterprise annuities and occupational annuities are standardized, transparent and fair pension management systems that have been generally proven by international experience. In order to vigorously promote the development of enterprise annuities and professional annuities, it is recommended that both enterprise annuities and professional annuities should be enforced. For enterprise annuities, you can first turn to "semi-mandatory" and then gradually move to "mandatory." The so-called "semi-mandatory" means that state-owned enterprises and other profitable enterprises must establish enterprise annuities, and assume more social responsibilities first, and those that are not yet profitable can choose to establish them.
When conditions are ripe, all units are required to be established to achieve "mandatory". Only when the enterprise annuity and occupational annuity achieve wide coverage can we truly reflect social equity.
The third is to further expand the investment scope of pensions.
Enterprise annuities and occupational annuities are used as ordinary people's life-saving money and as long-term stable funds. Under the premise of controllable risks, some funds should be invested to match the characteristics of pension assets and liabilities and be less affected by fluctuations in the capital market Long-term investment projects, including national key infrastructure construction projects, social housing construction, and pension community construction, etc., and allow the targeted allocation of large corporate bonds and financial bonds to enable pensions to obtain long-term and stable investment income.
According to statistics from the Ministry of Human Resources and Social Security, from 2007 to 2011, the average annual return on corporate annuities was 8.87%, which was significantly higher than the deposit interest rate and CPI over the same period. Generally speaking, the investment management of corporate annuities has achieved quite good results However, investment income is also directly affected by fluctuations in the capital market. For example, in the capital market environment of double-debt in 2011, the average annual rate of return was only -0.78%, which did not achieve the purpose of maintaining value. According to the characteristics of pensions, if the investment range can be broadened, longer-term investment projects can be configured, which can not only make up for the problem of insufficient national construction funds, but also make good capital for the capital market, stabilize the investment results, and realize the pension's own Investment objectives to safeguard the rights and interests of employees.
The fourth is to explore the feasibility of establishing the "Pension Supervision Bureau". With the development of enterprise annuities, occupational annuities, civil servants annuities, and the gradual realization of basic old-age insurance personal accounts, the scale of accumulated pensions will become larger and larger, and risks will increase, and regulatory requirements will increase. high. In order to strengthen the supervision of MPF, Hong Kong has established a special "Mandatory Provident Fund Schemes Authority" to effectively manage the MPF. The MPF in Hong Kong has developed rapidly since the establishment of the market and has been regulated by the market. Successful regulatory model. The scale of pensions in mainland China is much larger than the size of MPF in Hong Kong. In order to strengthen the supervision of pensions, can we learn from Hong Kong's practice and set up a "pension supervision bureau" when conditions are ripe to realize government functions and business supervision? Separation of functions, government departments are responsible for policy formulation, and the "Pension Supervision Bureau" is responsible for supervising and coordinating the management of pensions. It has a clear division of labor and coordination, and jointly establishes and develops a fair and standardized pension security system.