Japan: Pressure of Aggregated Generations for Old Age
On May 20, 2019, the Japanese government held a future investment conference and decided to extend the retirement age of workers to 70 years old again to deal with the aging crisis. According to the World Bank, Japan now accounts for 27% of the population over 65 years old, which is the most ageing country in the world, and this trend continues.
The simultaneous rapid decline in birthrate and mortality is the main reason for Japan's rapid ageing process. In terms of mortality, according to a report issued by Japan's Ministry of Health, Welfare and Labor, in 2018, the average life expectancy of Japanese men exceeded 81 years, while that of women exceeded 87 years. Judging by the birth rate, Japan's postwar baby boom concentrated around 1947-1951 and soon ended. Groups born at this peak of fertility (the so-called "mass generation") are also the representatives of the plight of the elderly in the face of the double pressures of the previous generation of the living elderly who still need to support and the next generation who have no children or children who are unable to support themselves.
In addition to Japan, many developed countries in Europe and the United States are also facing the plight of pension, as illustrated in Figure 1. According to the 2009 Social Security and Medicare Trustee Report released by the U.S. Treasury Department, expenditure on the U.S. Social Security program is expected to exceed income by 2020, the first time since 1982. In 2017 and 2018, German care insurance has been running out of money for two consecutive years.
China: There is a huge space for the development of pension investment
After more than 40 years of reform and development, China has established a three-pillar old-age security system, and established a modern old-age pension system framework with the tripartite responsibilities of the government, enterprises and individuals. The first pillar is the basic old-age insurance, which includes the basic old-age insurance for urban workers and the basic old-age insurance for urban and rural residents. The second pillar is occupational pension security, including enterprise pension system and occupational pension policy. The third pillar is the individual pension security, which is just in its infancy: in March 2018, the SFC issued the Guidelines for Pension Target Securities Investment Funds (Trial Implementation); in May 2018, the State issued the Guidelines for the Development of Personal Tax Delayed Commercial Pension Insurance Products; and in August 2018, the first FOF pension funds of 14 fund companies, such as Yifangda, Southern China and Huaxia, were approved for issuance. 。
At the macro level, China's pension assets are still mainly basic pensions, accounting for nearly 80%, and the scale of enterprise annuity and individual pension investment is quite small. In the three-pillar pension system of the United States, the second and third pillars occupy the dominant position, and the first pillar accounts for less than 8% of the total pension assets.
At the micro level, young people are also facing increasing pressure of providing for the aged. In terms of dependency ratio, the dependency ratio of China's pension insurance in the 1990s was about 5:1, that is, five insured persons support one retiree; by the end of 2018, this figure has dropped to 2.66, that is, about three people need to support one retiree.
At the household level, many Chinese households still allocate their assets mainly to real estate, with only 10% of the financial assets allocated, and most of them are cash assets. Such a structure easily makes the family portfolio less risk-resistant, and the allocation of pension assets still needs to be improved. In the United States, financial assets account for the highest proportion of household asset allocation, and the main components are pension assets and stocks.
Therefore, whether from the macro-level pension security system, or from the micro-level dependency ratio, family asset allocation, there is still a lot of room for development of domestic pension investment needs.
What should young people do?
Therefore, referring to the mature experience of overseas markets and the current situation of China, young people should start to invest in the elderly as soon as possible. In order to avoid the bankruptcy dilemma similar to that of Japan's mass generations, young people should realize as soon as possible that it is difficult to sustain their old age by relying solely on government pensions. They should establish their own concept of providing for the aged and remember that it is necessary to provide for the aged as soon as possible. And the sooner we make reserve for the elderly, the more we can get the long-term benefits of the funds, the more abundant the pension funds are.
The public FOF pension fund represented by Yifangda Huicheng Pension Fund Series provides a trustworthy option for investing in pension. Among them, with the approaching of the target date, the pension target date fund gradually reduces the allocation proportion of equity assets, which can well match the characteristics of individual investors'gradual decline in risk tolerance with age. Investors can directly choose the corresponding target date products according to their retirement time.
The other is the pension target risk fund, which sets the allocation ratio of equity assets and non-equity assets according to the specific risk preference, such as the fund with "robust" as the income target. The upper limit of the allocation ratio of equity assets is about 30%. Investors can choose different target risk funds according to their risk preference.
At present, there are three target date products under Yifangda: Yifangda Huicheng pension target date 2043 (006292.OF), Yifangda Huicheng pension target date 2038 (006860.OF), Yifangda Huicheng pension target date 2033 (006859.OF), which are suitable for people with retirement dates around 2043, 2038 and 2033, respectively. In addition, public information shows that Yifangda Huizhi Steady Endowment Target Risk Fund has been approved and will be issued in the near future. This is a target risk product, which will provide investors with low and medium risk tolerance with a new choice of pension investment tools.
